Financial Crime World

Financial Institutions Must Step Up Customer Verification to Combat Money Laundering and Terror Financing

Implement Robust Customer Acceptance, Identification, and Monitoring Policies

In a bid to combat money laundering (ML) and terror financing (TF), financial institutions that facilitate local or cross-border inward remittances using Money Transfer Agents (MTAs) must strengthen their customer verification processes.

New Regulations Require Enhanced Due Diligence

According to new regulations, MTAs and Cambios - entities that exchange, buy, or sell foreign currency - are required to develop a clear Customer Acceptance Policy (CAP) outlining explicit criteria for accepting customers. The CAP must ensure that no transactions are conducted anonymously or in fictitious names.

Verify Customer Identity

To verify the identity of customers, MTAs and Cambios must obtain sufficient information from reliable sources, such as:

  • National identification cards
  • Passports
  • Driver’s licenses

For legal persons, such as companies, they must verify the entity’s legal status through official documents and obtain a letter of authorization from the entity showing who is authorized to act on its behalf.

Prepare Customer Profiles

MTAs and Cambios are required to prepare customer profiles for each new customer, which may include information such as:

  • Identity
  • Address
  • Occupation
  • Nationality
  • Other relevant details

The nature and extent of due diligence will depend on the perceived risk.

Periodical Updating and Enhanced Due Diligence

To prevent ML and TF, MTAs and Cambios must also introduce a system of periodical updating of customer identification data and apply Enhanced Due Diligence (EDD) measures when there is suspicion of illegal activities or reasonable grounds to doubt previously obtained information.

Educate Customers

Moreover, financial institutions are encouraged to educate their customers about the importance of identifying themselves accurately and the consequences of non-compliance with anti-money laundering regulations.

Protecting Integrity and Public Trust

By implementing these measures, MTAs and Cambios can help prevent ML and TF, protect the integrity of the financial system, and maintain public trust.