Annex D Anti Money Laundering Module (AML)
App1 CUSTOMER IDENTIFICATION REQUIREMENTS
A1.1 Duties and responsibilities
Guidance relating to Rules 3.4.1 and 3.4.2
1. Pursuant to Rule 3.4.1, an Authorised Firm is required to be satisfied that a
prospective customer is who he claims to be and obtain evidence to prove this.
2. ‘Know your Customer’ and knowing the Persons with or for whom the customer acts
or proposes to act, pursuant to Rule 3.4.2 consists of several aspects:
a. personal details: an Authorised Firm should obtain and verify details which
include the true full name or names used and the current permanent address;
b. the nature and level of business to be conducted: an Authorised Firm should
ensure that sufficient information is obtained regarding the nature of the
business that the customer expects to undertake, and any expected or
predictable pattern of Transactions. This information should include the
purpose and reason for opening the account or establishing the business
relationship, the anticipated level and nature of the activity that is to be
undertaken and the various relationships of signatories to the account and
the underlying Beneficial Owners;
c. the origin of funds: an Authorised Firm should identify how all payments
were made, from where and by whom. All payments should be recorded to
provide an audit trail; and
d. the source of wealth: an Authorised Firm should establish a source of wealth
or income, including how the funds were acquired, to assess whether the
actual Transaction pattern is consistent with the expected Transaction
pattern and whether this constitutes any grounds for suspicion of money
laundering.
3. It is important for an Authorised Firm to obtain such information because this process
should allow for the risk of being exploited for the purpose of money laundering to
be reduced to a minimum. It should also enable suspicious Transactions to be
detected because they are incompatible with the information received.
4. Any unusual facts of which an Authorised Firm becomes aware during the
identification process may be an indication of money laundering and should prompt
the Authorised Firm to request supplementary information and evidence.
5. The DFSA expects an Authorised Firm to establish the full identity of all relevant
parties to the business relationship. Further, an Authorised Firm should apply
adequate measures to understand the relationship between the counterparties
involved. The following list includes some identification checks for particular
relationships:
a. joint account holders and joint applicants: identification should be
performed and evidence obtained for all applicants and account holders;
b. pooled accounts which are managed by professional intermediaries such as
mutual funds, pension funds, money funds, lawyers, stockbrokers on behalf
of entities or other Persons: all Beneficial Owners of the account held by the
intermediary should be identified;
c. power of attorney: identification and evidence should be obtained for the
applicants and account holders as well as for the holder of the power of
attorney; and
d. minors: an account for a minor should be opened by a family member or
guardian whose identification evidence should be obtained in addition to the
birth certificate or passport of the minor.
6. With regard to insurance companies, the following ‘Know Your Customer’
verification and identification should be taken into account:
Verification
a. In accordance with Rules 3.4.1 and 3.4.2, an insurance company
undertaking verification should establish to its satisfaction that every
verification subject exists. All verification subjects of joining applicants for
insurance business should normally be verified. In the case of arrangements
such as trust, nominee companies and front companies, verification should
include an assessment of the substance of the arrangement, for example in
relation to settlors, trustees and beneficiaries.
b. An insurance company should carry out verification in respect of the parties
entering into the insurance contract. On some occasions there may be
underlying principals and if this is the case, the true nature of the
relationship between principals and the policyholders should be established
and appropriate enquiries performed about the former, especially if the
policyholders are accustomed to acting on their instructions. ‘Principal’
should be understood in its widest sense to include, for example, Beneficial
Owners, settlors, controlling shareholders, directors and major beneficiaries.
Customer Identification
c. A customer includes the person or entity that holds a policy with the
insurance company or, when it appears that the person or entity asking for a
policy to be opened or a Transaction to be carried out, might not be acting
on its own behalf, those on whose behalf a policy is maintained; and the
beneficiaries of policies held by professional financial intermediaries and
any Person connected with a policy who could pose a significant
reputational or other risk to the insurance company.
d. Insurance companies should establish a systematic procedure for verifying
the identity of customers and should not issue a policy until the identity of a
new customer is satisfactorily established, see Rule 3.4.3.
7. In addition to the requirements specified above, a Trust Service Provider must carry
out verification, where reasonably possible, in respect of all the parties related to a
trust including the settlor, the protector, the enforcer, beneficiaries and any Person
likely to be entitled to receive a distribution whether or not such Person is a named
beneficiary.