Financial Crime World

Verification of Legal Persons and Representatives

In an effort to combat money laundering and terrorist financing, businesses are required to verify the identity of legal persons and their representatives. This includes checking registration certificates, register excerpts, and data from other independent and reliable sources.

Verification Requirements

  • The registration certificate or corresponding register excerpt should not be older than a week at the verification occasion.
  • If an excerpt is obtained from a website that provides data on legal persons, it must be clarified that the data is obtained from the Swedish Companies Registration Office or a corresponding register from another nation’s authority.
  • The representative of the legal person must also be identified and verified through the same procedures as for other physically present customers.
  • The representative’s authorisation to represent the legal person must be checked against power of attorney documentation, appointment certificate, or corresponding authorisation documentation.

Beneficial Owners

Businesses should investigate if the customer has one or multiple beneficial owners. A beneficial owner is a person (or persons) who owns or controls the customer on their own (or together).

Investigation Requirements

  • If the investigation reveals that the customer has one or multiple beneficial owners, the identity must be verified in the same way as for customers who are natural persons.
  • If the customer is a legal person, a trust, or a similar legal construction, the investigation should include measures to understand the customer’s ownership and control structures.
  • The Swedish Companies Registration Office provides a register over beneficial owners, which can serve as a starting point for the investigation.

Exceptions from Investigation Obligation

Exceptions apply to customers that are limited companies (Ltd) and whose shares are traded on a regulated market in Sweden, within EES, or in a corresponding market outside EES.

Alternative Real Principal

If the result of the investigation clarifies that the customer does not have a real principal, an alternative real principal must be appointed. This applies if there are reasons to believe that the one who has been identified as a real principal does not ultimately own or control the customer.

Verification Requirements

  • The alternative real principal’s identity must also be verified.

Politically Exposed Persons (PEP)

Businesses should investigate whether the customer, or the customer’s real principal, is a PEP, or a family member or known co-worker to a PEP. A PEP is someone who has or had a prominent position in a nation or an important leadership function in an international organisation.

Investigation Requirements

  • If the customer is a PEP, or a relative of a PEP, the business must take adequate actions to find out where the origin of the assets and apply a continuous and enhanced evaluation of the business relation.

Purpose and Nature of Business Relation

Before establishing a business relation, businesses should gather information about the purpose and nature of the relation. This includes knowing what the customer’s business is about and how they will use the products or services.

Information Gathering

  • Gather information about the purpose and nature of the business relation.
  • Know what the customer’s business is about and how they will use the products or services.

Scope of Investigation

The scope of the investigation depends on the assessed risk attributed to the business relation. A higher risk means additional, in-depth questions are required, while a lower risk may allow for assumptions based on how customers normally use products and services.

Risk Assessment

  • Assess the risk attributed to the business relation.
  • Adjust the due diligence measures accordingly.

Due Diligence Measures

Customer due diligence measures must be adjusted to the risk assessment of a single customer - the customer’s risk profile. The due diligence measures mentioned above must always be applied when dealing with a normal-risk customer. If the assessed risk is low, simplified measures can be taken, such as verifying the customer’s identity after a business relation has been established. If the assessed risk is high, extended customer due diligence measures must be taken.

Measures to Take

  • Verify the customer’s identity.
  • Check power of attorney documentation, appointment certificate, or corresponding authorisation documentation.
  • Investigate beneficial owners and verify their identities.
  • Identify and verify representatives of legal persons.
  • Gather information about the purpose and nature of the business relation.
  • Assess the risk attributed to the business relation.

Continuous Evaluation of Business Relations

Current business relations shall be evaluated continuously to ensure that the customer due diligence is current and adequate to handle the assessed risks for money laundering and terrorist financing.

Continuous Monitoring

  • Continuously evaluate current business relations.
  • Ensure customer due diligence is current and adequate.
  • Handle assessed risks for money laundering and terrorist financing.

Measures to Take if Customer Due Diligence is Lacking

Businesses may not enter into or maintain a business relation with a customer, or carry out single transactions, if they have not achieved customer due diligence.

Consequences of Lack of Due Diligence

  • Businesses may not enter into or maintain a business relation with a customer.
  • Businesses may not carry out single transactions.