Financial Institutions Must Identify and Verify Customer Beneficial Owners
New regulations require financial institutions to take reasonable measures to determine if a customer is acting on their own or behalf of one or more beneficial owners. If a financial institution determines that a customer is acting on behalf of others, they must verify the identity of those individuals using reliable sources.
Exemptions for Listed Companies
For customers that are companies listed on a stock exchange, financial institutions may not need to conduct full due diligence measures if information on the company’s beneficial ownership is publicly available. This exemption recognizes that publicly traded companies have already undergone rigorous scrutiny and are less likely to pose a risk of money laundering or terrorist financing.
Simplified Due Diligence Procedures
Financial institutions may apply simplified customer due diligence procedures in certain circumstances where the risk of money laundering or terrorist financing is low. These simplified procedures must still be commensurate with the identified risks and may include:
- Reduced frequency of customer identification updates
- Reduced on-going monitoring
These simplified procedures aim to strike a balance between minimizing regulatory burdens and maintaining robust anti-money laundering and combating the financing of terrorism (AML/CFT) measures.
Delayed Customer Verification
In some cases, financial institutions may engage in a business relationship with a customer prior to completing the verification process as long as all necessary measures are taken to manage the risk of money laundering and terrorist financing. This allows financial institutions to establish relationships with customers while ensuring that they have sufficient information to verify their identity and assess the risks associated with them.
Additional Requirements for Customer Information
Financial institutions must gather and maintain accurate and up-to-date information on customers and beneficial owners throughout the duration of the business relationship. This includes:
- Obtaining updated financial statements
- Gathering taxation information
- Collecting supporting documentation for transactions
These requirements aim to ensure that financial institutions have a comprehensive understanding of their customers’ activities and can identify any suspicious or unusual behavior.
Key Takeaways
• Financial institutions must identify and verify beneficial owners of customers • Simplified due diligence procedures may be applied where risks are low • Delayed customer verification is allowed under certain conditions • Additional requirements for customer information must be met
By implementing these measures, financial institutions can ensure compliance with AML/CFT regulations and maintain a secure and transparent environment for their customers.