Effective ‘customer due diligence’ measures are an essential part of any system designed to prevent money laundering and are a cornerstone requirement of the Money Laundering Regulations 2007 (2007 Regulations) and that Businesses should take a risk-based approach to allow effort to be concentrated on higher risk areas. Risks must be assessed before the appropriate level of customer due diligence can be applied. So Customer due diligence measures needs to be carried out:
- When establishing a business relationship,
- When carrying out an occasional transaction,
- Where there is a suspicion of money laundering or terrorist financing; and
- Where there are doubts concerning the veracity of previous identification information
Businesses are required to ensure customers due diligence procedures are applied to all clients, both new and existing. Customer due diligence must be applied to existing clients (i.e. those existing prior to the 2007 Regulations coming into force, including those clients who were previously exempt pre 1 March 2004) at appropriate times on a risk-sensitive basis. So Before entering a business relationship, businesses must:
- Identify and verify the client’s identity using documents or information from reliable and independent sources.
- Identify the beneficial owner of the client (where applicable), including understanding the ownership and control structure of the client and verifying, according to risk, the identity of the beneficial owner(s).
- Obtain information on the purpose and intended nature of the business relationship