These requirements should apply to all new customers, although financial institutions should also apply this recommendation to existing customers on the basis of materiality and risk, and should conduct due diligence on such existing relationships at appropriate times.įinancial institutions should be required to maintain, for at least five years, all necessary records on transactions, both domestic and international, to enable them to comply swiftly with information requests from the competent authorities. Further, it should be required to terminate the business relationship and should consider making a suspicious transactions report in relation to the customer. Where the financial institution is unable to comply with the applicable CDD requirements mentioned above, it should be required not to open the account, commence business relations or perform the transaction.
(d) 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.įinancial institutions should be required to apply each of the CDD measures shown above, but should determine the extent of such measures using a risk-based approachįinancial institutions should be required to verify the identity of the customer and beneficial owner before or during the course of establishing a business relationship or conducting transactions for occasional customers.Ĭountries may permit financial institutions to complete the verification as soon as reasonably possible following the establishment of the relationship, where the money laundering and terrorist financing risks are effectively managed and where this is essential not to interrupt the normal conduct of business. (c) Understanding and obtaining information on the purpose and intended nature of the business relationship. For legal persons and arrangements, this should include financial institutions understanding the ownership and control structure of the customer. (b) 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. (a) Identifying the customer and verifying that customer’s identity using reliable, independent source documents, data or information. The CDD measures to be taken are as follows: Each country may determine how it imposes specific CDD obligations, through either law or enforceable means. The principle that financial institutions should conduct CDD should be set out in law.the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data.there is a suspicion of money laundering or terrorist financing or.carrying out occasional transactions: above the applicable designated threshold (USD/EUR 15,000).Here is what FATF recommends surrounding customer due diligence.Ĭustomer Due Diligence and Record Keepingįinancial institutions should be prohibited from keeping anonymous accounts or accounts in obviously fictitious names.įinancial institutions should be required to undertake customer due diligence (CDD) measures when: The risk-based approach allows countries to adopt a more flexible set of measures in order to target their resources more effectively and apply preventive measures in the most effective way. The FATF standards have also been revised to strengthen the requirements for higher risk situations, and to allow countries to take a more focused approach in areas where high risks remain or implementation could be enhanced.Ĭountries should identify, assess and understand the risks of money laundering and terrorist financing and then adopt appropriate measures to mitigate the risk. The revisions to FATF standards over the years address new and emerging threats, clarify and strengthen many of the existing obligations, while maintaining the necessary stability and rigor in the Recommendations. Many Financial Intelligence Units worldwide use information from the Financial Action Task Force (FATF) to help build their rules-based plans for fighting financial crimes.Īt the center of these best practices is often the FATF Recommendations, which have been reviewed and updated in close co-operation with the FATF-Style Regional Bodies (FSRBs) and the observer organizations including the International Monetary Fund, the World Bank and the United Nations.