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type of due diligence (A bank shall...perform at least the following…
type of due diligence
A bank shall...perform at least the following enhanced CDD measures where a customer or any beneficial owner of the customer is determined by the bank to be a politically exposed person, or a family member or close associate of a politically exposed person under paragraph:
obtain approval from the bank’s senior management to establish or continue business relations with the customer;
establish, by appropriate and reasonable means, the source of wealth and source of funds of the customer and any beneficial owner of the customer;
conduct, during the course of business relations with the customer, enhanced monitoring of business relations with the customer. In particular, the bank shall increase the degree and nature of monitoring of the business relations with and transactions for the customer, in order to determine whether they appear unusual or suspicious.
Enhanced due diligence
Additional information must be gathered to demonstrate that adequate due diligence has been undertaken. Further steps must sometimes be taken to gain assurance that wealth has not been obtained from criminal activity. In a case where the source of wealth is obvious (e.g. a monthly salary that is credited to the account), there is no further corroboration required.
There could also be instances where more detailed corroboration is required, such as client interviews, background checks and documentary evidence – all of which are valid approaches to corroborating the source of wealth and funds.
in the UK the Joint Money Laundering Steering Group (JMLSG), which issues guidance to UK firms, provides the following definition of simplified due diligence in guidance revised in 2017:
A firm may apply SDD if it determines that, taking into account its risk assessment, the business relationship or transaction presents a low degree of risk of ML/TF.
The Interpretive Notes to Recommendation 10 of the FATF Recommendations clarify the requirements in the following terms.
The simplified measures should be commensurate with the lower risk factors (e.g. the simplified measures could relate only to customer acceptance measures or to aspects of ongoing monitoring). Examples of possible measures are:
Verifying the identity of the customer and the beneficial owner after the establishment of the business relationship (e.g. if account transactions rise above a defined monetary threshold).
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Reducing the degree of ongoing monitoring and scrutinising transactions
based on a reasonable monetary threshold.
Not collecting specific information or carrying out specific measures to
understand the purpose and intended nature of the business relationship, but inferring the purpose and nature from the type of transaction or business relationship established.
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Regulations in most jurisdictions normally require that beneficial owners who own or control more than 25% of body corporates or, partnerships or who have more than a 25% beneficial interest in a trust are identified, and that risk-based and adequate measures are taken to verify their identities.
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It is important to remember that CDD and EDD are not ‘tick box’ exercises. Every case, particularly high-risk cases requiring EDD, must be risk assessed on its own merits and appropriate identification and verification of information must be obtained.
The TI Corruption Perception Index lists over 170 countries, each of which is awarded a corruption perception score. A score of 100 indicates a perception that bribe requests are never made, while a score of 0 indicates a perception that bribe requests are always made. More than two thirds of the countries featured on the index are awarded a score of less than 50.