Financial Crime World

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Verification of Legal Person and Representative

In accordance with Swedish regulations, it is essential to verify the identity of legal persons and their representatives when establishing a business relationship. This involves checking registration certificates, register excerpts, or data from independent and reliable sources.

Requirements for Verification

  • For legal persons, the registration certificate should not be older than a week at the verification occasion.
  • If an excerpt is obtained from a website, 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 a legal person must also be identified and verified through the same procedures as for other physically present customers.
  • Their authorisation to represent the legal person should be checked against power of attorney documentation, appointment certificates, or corresponding authorisation documentation.

Beneficial Owners

Investigating beneficial ownership is crucial in determining whether a customer has one or multiple beneficial owners. A beneficial owner refers to an individual (or individuals) who owns or controls the customer, either alone or jointly.

Verification Process for Beneficial Owners

  • If a customer has one or multiple beneficial owners, their identity must be verified in the same way as for customers who are natural persons.
  • For legal persons, trusts, or similar legal constructions, investigations should include measures to understand ownership and control structures.
  • The Swedish Companies Registration Office provides a register of beneficial owners, which can serve as a starting point for verification.

Exceptions from Investigation Obligation

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

Alternative Real Principal

If an investigation reveals that a customer does not have a real principal or if there is reason to believe that the identified real principal does not ultimately own or control the customer, an alternative real principal should be appointed. This person should be verified and should hold the most significant power in the business.

Politically Exposed Persons (PEPs)

Business operators must identify whether customers or their real principals are PEPs, family members of PEPs, or known co-workers of PEPs. If a customer is a PEP or has a relative who is a PEP, enhanced due diligence measures should be taken to understand the origin of assets and continuously evaluate the business relationship.

Purpose and Nature of Business Relation

Before establishing a business relation, it is essential to gather information about the purpose and nature of the relationship. This includes understanding what the customer’s business involves and how they plan to use products or services.

Importance of Understanding the Relationship

  • This information serves as a basis for assessing which activities and transactions the customer will carry out within the framework of the relationship.
  • It helps in determining their risk profile.

Scope of Investigation

The scope of investigation depends on the assessed risk attributed to the business relation. Higher-risk relations require additional, more in-depth questions, while lower-risk relations may allow for some assumptions.

Due Diligence Measures

Customer due diligence measures must be adjusted based on the risk assessment of a single customer. Simplified measures can be taken for low-risk customers, such as verifying their identity after establishing a business relationship. For high-risk customers, extended measures should be taken, including asking questions about financial situations and asset origins.

Continuous Evaluation of Business Relations

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

  • Renewed verification of representatives and beneficial owners
  • A focus on the purpose and nature of the business relation

Measures if Customer Due Diligence is Lacking

Business operators may not enter into or maintain a business relationship with a customer, or carry out single transactions, without achieving customer due diligence.