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Financial Institutions Required to Verify Beneficial Ownership
In an effort to combat money laundering and terrorist financing, financial institutions in [Country/Region] are now required to take reasonable measures to determine if a customer is acting on their own behalf or on behalf of one or more beneficial owners.
Determining Beneficial Ownership
According to Article 8 of the Regulation, if a financial institution determines that a customer is acting on behalf of one or more beneficial owners, they must gather and verify information about these individuals. This includes obtaining documents such as:
- Identification papers
- Proof of address
- Business registration records
Simplified CDD Measures Allowed in Low-Risk Situations
In cases where the risk of money laundering or terrorist financing is low, financial institutions may apply simplified customer due diligence (CDD) procedures. These measures must be commensurate with the identified risks and may include:
- Reducing the frequency of customer identification updates
- Limiting the degree of ongoing monitoring
Delayed Customer Verification Permitted in Certain Circumstances
Financial institutions are permitted to engage in a business relationship with a customer prior to completing the verification process, provided that certain conditions are met. These conditions include:
- Ensuring that ML/TF risks are effectively managed
- Adopting risk management procedures to limit the number, types, or amount of transactions that can be performed
Additional Requirements for Customer Information
Financial institutions must gather and maintain customer and beneficial owner information throughout the course of the business relationship. This includes:
- Keeping records up-to-date and relevant by reviewing existing records at regular intervals
- Obtaining updated financial statements from customers
- Ensuring that taxation information is obtained and updated on an annual basis
Penalties for Non-Compliance
Financial institutions that fail to comply with these requirements may face penalties and fines. The regulation emphasizes the importance of effective risk management and customer due diligence in preventing money laundering and terrorist financing.
Conclusion
The regulation aims to strengthen [Country/Region]’s efforts to combat financial crimes and ensure a safer and more secure financial system for all stakeholders.