Rigorous Know Your Customer and Customer Due
Diligence arrangements help to protect a firm's reputation and the integrity of
the financial system by reducing the likelihood of regulated firms becoming a vehicle for, or a victim of, financial crime and suffering consequential reputational damage. Inadequacy of KYC and CDD standards can expose a firm to serious business operation and control risks.
The Financial Action Task Force (FATF) recommends
basic CDD measures as follows:
- Identifying the customer and verifying that customer’s identity using reliable, independent source documents, data or information.
- Identifying the beneficial owner, and taking reasonable measures to verify the identity of the beneficial owner, such that the financial institution is satisfied that it knows who the beneficial owner is. For legal persons and arrangements this should include financial institutions understanding the ownership and control structure of the customer.
- Understanding and, as appropriate, obtaining information on the purpose and intended nature of the business relationship.
- Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds.
A customer risk assessment is carried out before a firm establishes a business relationship with a customer followed by Customer Due Diligence. The risk assessment evaluates the extent to which that customer exposes it to a range of risks including involvement in money laundering and a risk rating is assigned to that customer. Information required includes:
- Who is the customer?
- Who is the beneficial owner?
- Where is the customer located? Where do they live? Where are their assets located?
- What is the customer's business?
- Where is their business (or businesses) located?
- What is the structure of the business?
- Why is the customer looking to establish the business relationship?
- Which products/services do they require?
- What is the customer's source of wealth and source of funds?
- Is the customer a Politically Exposed Person (PEP)?
For
full details of CDD requirements as per the Dubai Financial Services Authority’s
Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module see http://dfsa.complinet.com/net_file_store/new_rulebooks/d/f/DFSA1547_20015_VER130.pdf
Useful websites include:
- Financial Action Task Force – http://www.fatf-gafi.orgFor the FATF 40 recommendations, country evaluation reports, typology reports
- Dubai Financial Services Authority – http://www.dfsa.ae
- Dubai International Financial Centre – http://www.difc.ae
- Know Your Country – http://knowyourcountry.com
- Office of Foreign Assets Control - https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx
- Office of Financial Sanctions Implementation HM Treasury - https://www.gov.uk/government/organisations/office-of-financial-sanctions-implementation
- United Nations Security Council Resolutions - http://www.un.org/en/sc/documents/resolutions/
If you need Anti-Money Laundering training or require AML manuals please contact us by email at info@holtconsultancy.com or telephone +971 4 386 6360.
