Financial Institutions Must Verify Customers’ Identity and Ownership

In today’s era of heightened security concerns, financial institutions play a crucial role in combating money laundering and terrorism financing. To achieve this, they must take reasonable measures to determine whether a customer is acting on their own or on behalf of one or more beneficial owners.

Verifying Identity and 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 should verify the identity and ownership of these individuals. The verification process involves reviewing documents such as:

• Business registration papers
• Licensing papers
• Checking for any inconsistencies or red flags

Simplified Customer Due Diligence Procedures

The regulation also outlines simplified customer due diligence procedures that can be applied in certain circumstances where the risk of money laundering or terrorist financing is lower. These measures may include:

• Reducing the frequency of customer identification updates
• Limiting the degree of on-going monitoring and scrutiny of transactions

Pre-Verification Business Relationship Engagement

Financial institutions are also required to engage in a business relationship with customers prior to completing the verification process, provided all necessary steps are taken to manage the risks associated with delayed verification. This includes:

• Implementing procedures to monitor large or complex transactions
• Limiting the number, types, and amount of transactions that can be performed by the customer

Customer Information Gathering and Maintenance

In addition to verifying the identity and ownership of customers, financial institutions must also gather and maintain customer information throughout the course of the business relationship. This includes:

• Documents, data, or information collected under the CDD process
• Keeping records up-to-date and relevant by undertaking reviews of existing records at appropriate times

Additional Requirements for Customer Information (Legal Persons)

For legal persons, financial institutions must ensure that:

• Business and company registration and licensing documents are current and remain valid throughout the duration of the relationship
• Updated financial statements from customers are obtained
• Taxation information is obtained on an annual basis

Conclusion

By implementing these measures, financial institutions can help to prevent money laundering and terrorist financing and maintain a safe and secure environment for their customers.