Financial Institutions Must Verify Customer’s Beneficial Owner
New regulations have been introduced to require financial institutions to take reasonable measures to determine if a customer is acting on their own or on behalf of one or more beneficial owners. This is part of efforts to prevent money laundering and terrorist financing.
Identifying Beneficial Owners
According to Article 8, financial institutions must verify the identity of beneficial owners if they are found to be acting on their behalf. Customers are required to provide information about themselves and their beneficial owners, including:
- Documentation such as business registration and licensing documents
- Financial statements
- Taxation information
- Supporting documentation for transactions
Simplified CDD Measures Possible
Financial institutions may apply simplified customer due diligence procedures if they undertake a documented risk assessment of the customer relationship and determine that the risk of money laundering or terrorist financing is lower. This can include:
- Reducing the frequency of customer identification updates
- The degree of ongoing monitoring
- Scrutinizing transactions
Delayed Customer Identification Verification Allowed
Financial institutions are allowed to engage in business with customers prior to completing the verification process if certain conditions are met, including:
- Verification occurs as soon as reasonably practicable
- It is essential not to interrupt normal business conduct
- ML and TF risks are effectively managed
Additional Requirements for Customer Information
The regulations require financial institutions to gather and maintain customer and beneficial owner information throughout the course of the business relationship. This includes updating documents, data, or information collected under the CDD process as necessary.
Financial institutions must also ensure that certain documentation is current and remains valid throughout the duration of the relationship, including:
- Business and company registration and licensing documents
- Financial statements
- Taxation information
- Supporting documentation for transactions
Consequences of Non-Compliance
The regulations make it clear that failure to comply with these requirements can result in serious consequences, including fines and penalties. Financial institutions are expected to adhere to these new rules to prevent money laundering and terrorist financing.
Impact on Businesses
These regulations will have a significant impact on businesses operating in the financial sector. To ensure compliance, businesses must:
- Verify customer identity
- Conduct ongoing monitoring
- Maintain accurate records
Businesses that fail to comply with these regulations risk facing serious consequences, including fines and penalties. Therefore, it is essential for them to familiarize themselves with the new rules and implement necessary changes to their operations.