Financial Crime World

Financial Institutions Must Verify Identity of Beneficial Owners, Regulators Emphasize

In an effort to combat money laundering and terrorist financing, Lesotho’s Money Laundering and Proceeds of Crime Regulations, 2019 stress the importance of financial institutions verifying the identity of beneficial owners.

Verifying Beneficial Ownership

According to the regulations, financial institutions and financial service providers must take reasonable measures to verify the identity of a beneficial owner through information such as:

  • The identity of natural persons who ultimately hold control over a legal person or entity
  • Situations where no natural person exercises control through ownership interest
  • Where there is doubt about the identity of the beneficial owner

Anti-Money Laundering and Counter-Terrorist Financing Controls

The regulations also require financial institutions and financial service providers to:

  • Establish and maintain adequate anti-money laundering and counter-terrorist financing controls
  • Conduct customer due diligence measures
  • Carry out ongoing monitoring
  • Report suspicious transactions

Correspondent Banking Relationships

In addition, the regulations prohibit financial institutions from entering into or continuing correspondent banking relationships with:

  • Shell banks
  • Other institutions that may be used for money laundering or terrorist financing activities

Enhanced Measures for Higher-Risk Countries

The regulations outline enhanced measures to be applied to clients or customers from higher-risk countries, as deemed necessary by:

  • The Financial Action Task Force (FATF)
  • The sector supervisory authority

Key Takeaways

• Financial institutions and financial service providers must verify the identity of beneficial owners through information such as natural persons who ultimately hold control over a legal person or entity. • Beneficial ownership information is to be obtained, maintained, and updated regularly. • Financial institutions must establish and maintain adequate anti-money laundering and counter-terrorist financing controls. • Enhanced measures are to be applied to clients or customers from higher-risk countries.

By adhering to these regulations, Lesotho’s financial sector can help prevent the misuse of its financial systems for illegal activities and maintain a reputation as a stable and secure financial hub.