Financial Institutions Must Verify Customer Identity and Report Suspicious Transactions
In an effort to combat money laundering, terrorist financing, and proliferation financing, the Financial Services Commission has issued new regulations requiring financial institutions to verify the identity of their customers and report any suspicious transactions.
Verification of Customer Identity
According to the regulations, financial service practitioners (FS Practitioners) must obtain evidence of the identity of a majority of partners, owners, or managers and authorized signatories before establishing a business relationship. They must also obtain a copy of the mandate from the partnership or unincorporated business authorizing the establishment of the relationship.
- Verify the identity of settlors or persons adding property to a trust
- Recognize the purpose and nature of the trust
- Identify the funds settled on it
- Ensure that payments from the trust are authorized and made in accordance with the terms of the trust
Online Verification Requirements
For financial institutions offering services over the Internet, additional measures must be taken to verify the identity of clients, including:
- Obtaining supporting documentation
- Monitoring activity in customer accounts regularly
Reporting Suspicious Transactions
The regulations also require FS Practitioners to report any transactions relating to an account to the Financial Intelligence Unit where there are reasonable grounds to suspect that the transactions could constitute or be related to:
- Money laundering
- Terrorist financing
- Proliferation financing
- Any offence
This includes:
- Complex, unusual, or large business transactions
- Unusual patterns of transactions
- Insignificant but periodic transactions
Consequences of Non-Compliance
FS Practitioners who fail to comply with these regulations may face criminal, civil, or administrative liability. However, if a report is made in good faith, FS Practitioners and connected persons will be exempt from such liability.
Purpose of the Regulations
These regulations aim to prevent the misuse of financial institutions for illicit activities and ensure that they operate in a safe and secure manner. By implementing these measures, financial institutions can help protect their customers and the integrity of the financial system.