Anti-Money Laundering Guide to Customer Due Diligence

Anti-Money Laundering Guide to Customer Due Diligence, AML Training in Dubai
Anti-Money Laundering Guide to Customer Due Diligence

Anti-Money Laundering Guide to Customer Due Diligence : Customer Due Diligence for Anti Money Laundering

What does Customer Due Diligence mean?

  • Identify & verify the customer.
  • Identify & verify the beneficial owner (An individual who ultimately owns or controls the customer and/or on whose behalf a transaction or activity is conducted).
  • Establish purpose & intended nature of business relationship (a business, professional or commercial relationship between the designated person and the customer that the designated person expects to be ongoing).
  • Monitor customer dealings on an on-going basis.

Beneficial Owner

  • Company

       An Individual holding 25% or more of shares or voting rights.

  • Partnership

An Individual holding 25% or more of profits or capital or voting rights,

  • Trusts

An individual with at least 25% of capital or has control over a trust.

  • Estate


Purpose & intended nature of the business relationship

In most cases this will be self evident e.g.

  • Investing in a life policy
  • Opening bank account

Ongoing monitoring

Scrutinise transactions:

  • Source of wealth or funds
  • Consistent with knowledge of customer and the customer’s business and pattern of transactions
  • Customer Due Diligence Requirements
  • Legislation allows designated persons to apply aspects of the customer due diligence requirements on a risk-sensitive basis depending on:
  • a) The nature of the product being sold;
  • b) The delivery mechanism or distribution channel used to sell the       product;
  • c) The profile of the customer; and
  • d) The customer’s geographical location and source of funds.

Intermediaries are required to carry out Customer Due Diligence

  • Prior to establishing a business relationship with the customer.
  • Prior to carrying out for/with the customer any transaction which appears linked to another transaction or prior to assisting the customer in carrying out a single transaction if: 

    (i) You do not have a business relationship with the customer; and

    (ii) The total amount of money paid by the customer in the single transaction or series of transactions is greater than €15,000.

  • Prior to carrying out any service for the customer, if you have reasonable grounds to believe that there is a real risk that the customer is involved in money laundering/terrorist financing(ML/TF).
  • If you have grounds to doubt the veracity of documents provided by the client.

Ongoing customer due diligence

Reporting entities must monitor their customers to identify, mitigate and manage any Money Laundering risk that may be posed by providing a designated service. OCDD obligations apply to all customers, including pre-commencement customers and also those who were identified by another reporting entity.

There are three mandatory components of OCDD:

  • KYC information
  • a transaction monitoring program
  • an enhanced customer due diligence program.

Reporting entities need to determine when and in what circumstances additional KYC information should be collected, updated or verified.

A transaction monitoring program that sets out how customer transactions will be monitored, how the reporting entity will identify transactions that are unusual or suspicious and how such transactions will be managed once they are identified as unusual or suspicious is a requirement of an effective AML program.

Applicant for Business

  • A legal or natural person
  • Whether acting as principal or agent
  • Who seeks to form a business relationship, or carry out an occasional transaction
  • With a person who is acting in the course of either relevant financial business or relevant activity.

Beneficial Owner (BO)

General Definition:
  • A natural person who ultimately owns or controls the customer.
  • A natural person on whose behalf or for the benefit of whom a transaction is being conducted.
Specific Instances:
  • Body corporate or body of persons.
  • Legal entity or legal arrangement which administers and distributes funds.
  • Long term insurance business.

Body corporate or body of persons

  • A natural person who owns or controls, whether directly or indirectly, more than 25% of the shares or voting rights (including through bearer shares).
  • A natural person who otherwise exercises control over the management.

Legal entity or legal arrangement

  • A natural person who is the beneficiary of at least 25% of the property.
  • In the case of non-determined beneficiaries, the class of persons.
  • A natural person who controls at least 25% of the property.

Long term insurance business

  • The beneficiary under the policy.

Identification & Verification

  • Official full name
  • Date & place of birth
  • Permanent residential address
  • Identity reference number
  • Nationality
  • Government-issued document with photographic evidence to verify identity
  • Document to verify address

Identification and verification procedures depend on whether:

  • Applicant is acting on behalf of a natural person
  • Applicant is acting on behalf of a company or partnership
  • Applicant is acting on behalf of a foundation or association
  • Applicant is a trustee of a trust

Obliged entities must ensure that the applicant is duly authorised in writing

to act on behalf of the principal.

Ongoing Monitoring

Scrutiny of transactions:

  • On the basis of the business and risk profile of the customer.
  • In response to activities of a similar peer group.
  • In response to specific types of transactions.
  • Complex or large transactions.
  • Transactions from a non-reputable jurisdiction.

Updating CDD documentation:

  • Updating expired documentation.
  • Collecting new documentation as necessary.

Source of Wealth & Funds

  • At the beginning of the business relationship = Source of Wealth
  • The economic activity generating the total net worth of the customer
  • As part of the ongoing monitoring process = Source of funds
  • The activity, event, business, occupation or employment from which funds used in a transaction originate

Enhanced Due Diligence

General Circumstances
  • Customer Risk
  • Product/ Service Risk
  • Interface Risk
  • Geographic Risk

Specific Circumstances

  • Non Face-to-Face
  • Correspondent Banking
  • Politically Exposed Persons
  • New/ Developing Technologies

Simplified Due Diligence

For Applicants
  • Relevant financial business
  • Listed entities
  • BOs of pooled accounts
  • Public authorities/ bodies
  • Certain low-risk entities
For Products
  • Certain insurance policies
  • Certain pensions or similar schemes
  • Electronic money
  • Certain low-risk products

Have a look at our training courses on Corporate Crimes/ Anti-Money Laundering and to get latest news on world view please visit FATF website.

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