A reminder to focus on enhanced customer due diligence
In accordance with regulation 33 of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, a relevant person must apply enhanced customer due diligence measures and enhanced ongoing monitoring, in addition to the customer due diligence measures, in order to manage and mitigate the risks of money laundering or terrorist financing.
It is therefore vital to have a process for identifying when enhanced due diligence is required and then the measures that are required to be put in place.
A. Situations when enhanced due diligence is required
1. When the customer is not physically present at the time of identification checks.
2. When entered into a business relationship with a ‘politically exposed person’.
‘Politically exposed person’ (PEP) is a term describing someone who has been entrusted with a prominent public function. A PEP presents a higher risk for potential involvement in bribery and corruption, by virtue of their position and the influence that they may hold.
Typically, a PEP can be either a foreign or domestic individual such as senior politician, senior government, judicial or military official, senior executive of state owned corporations, or important political party official.
Requirements for a PEP apply to family members or close associates, any individual publicly known or known by the financial institution to be a close personal or professional associate.
3. When entered into a transaction with a person from a high-risk third country.
A high-risk third country is one identified by the European Commission as having strategic deficiencies in their national anti-money laundering and counter financing of terrorism regime. HM Treasury maintains lists of financial sanctions imposed in the UK by country, administration or terrorist group.
What is prohibited under each financial sanction depends on the financial sanction regulation. Regulations are imposed by the:
Check which jurisdictions are subject to sanctions.
4. In any other situation where there is a higher risk of money laundering.
For example:
B. Measures to undertake/consider
1. The enhanced due diligence measures when dealing with customers who are not physically present and other higher risk situations include:
2. The enhanced due diligence measures when dealing with a politically exposed person are:
3. Other enhanced due diligence measures include: