Financial Institutions Urged to Verify Business Applicants

Importance of Verification Highlighted in New Guidance Note

A recent guidance note from a leading industry association has emphasized the importance of verifying business applicants to prevent financial crimes. The note advises financial institutions to treat individual trustees, partners, and signatories as verification subjects unless they have no authority to operate relevant accounts or give instructions.

Verification Requirements for Partnerships and Limited Partnerships

• When dealing with partnerships, all partners who are relevant to the application and have individual authority to operate accounts should be treated as verification subjects.
• In limited partnerships, the general partner should be considered the verification subject, while limited partners need not be verified unless they are significant investors.

Verification of Underlying Beneficial Owners

• Financial institutions should verify underlying beneficial owners in companies, particularly those that are not publicly traded or do not have substantial premises and payroll.
• Signatories who customarily operate accounts for institutions such as associations, foundations, and charities should also be treated as verification subjects.

Exemptions from Verification Requirements

• Small one-off transactions unless they appear to be linked or part of a larger transaction are exempt from verification requirements.
• Certain postal, telephonic, and electronic businesses that do not provide cheque facilities are also exempt from verification requirements.

Importance of Vigilance in Preventing Financial Crimes

Industry experts say the new guidance note underscores the importance of vigilance in preventing financial crimes and emphasizes the need for financial institutions to stay proactive in verifying business applicants.