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Business Operators Must Verify Identity of Legal Persons and Beneficial Owners

In an effort to combat money laundering and terrorist financing, Swedish businesses are now required to conduct thorough identity verification procedures for legal persons and beneficial owners.

Verifying Representative Identity

According to recent regulations, business operators must verify the identity of a legal person’s representative and check their authorization to represent the company. This includes reviewing power of attorney documentation, appointment certificates, or other similar authorizations.

Investigating Beneficial Owners

In addition, businesses must investigate whether the customer has one or multiple beneficial owners, defined as individuals who own or control the company. The Swedish Companies Registration Office provides a register of beneficial owners, which business operators can use as a starting point for their investigation.

Verification Procedures

If a business operator finds that a customer has a beneficial owner, they must verify their identity in the same way as for natural persons. If the customer is a legal person, trust, or similar structure, the investigation should include measures to understand the company’s ownership and control structures.

Exceptions

Exceptions from the investigation obligation apply to limited companies whose shares are traded on regulated markets in Sweden, the European Economic Area (EEA), or equivalent markets outside the EEA.

Identifying Alternative Real Principals

Business operators must also identify and verify the identity of alternative real principals if they cannot determine a customer’s true beneficial owner. Furthermore, they must assess whether customers or their real principals are politically exposed persons (PEPs) or have family ties to PEPs.

Business Relationship Information

The purpose and nature of a business relation must be gathered before establishing a relationship, including information on what the customer’s business is about and how they will use the business operator’s products or services.

Risk-Based Approach

The scope of the investigation depends on the assessed risk attributed to the business relation, with higher-risk customers requiring more in-depth questioning and lower-risk customers allowing for assumptions based on typical customer behavior. Business operators must adjust their due diligence measures according to their risk assessment of each customer. Simplified measures can be taken for low-risk customers, while extended measures are required for high-risk customers.

Continuous Evaluation

Continuous evaluation of business relations is also necessary to ensure that customer due diligence remains current and adequate to handle assessed risks. Failure to conduct thorough customer due diligence can result in the inability to establish or maintain a business relationship with a customer.

Additional Resources

The Swedish Companies Registration Office provides more information on beneficial owners, and the register of beneficial owners is available on their website.

Source: Swedish Companies Registration Office, County Administrative Board