Enhanced due diligence requires additional documents, data or information to establish identity and source of funds for:
non face-to-face clients
politically exposed persons (“PEPs”)
clients or beneficial owners of clients with high-risk country or industry associations
clients whose matters involve any other high-risk factors
Non face-to-face clients
Regarding non face-to-face clients, the organisation must understand with whom we are dealing and why they are unable to meet face-to-face.
While there are usually legitimate reasons why, on occasion, clients cannot visit the office (e.g. they live overseas or in another part of the country), it is important that we remain aware of the possibility of identity theft.
Politically exposed persons
The Regulations stipulate that where the client is a politically exposed person (“PEP”), enhanced due diligence must be applied. A PEP is an individual entrusted in the past year with a prominent public function in a community institution, an international body or any state , including the UK.
For such clients, the MLRO or other designated person should be contacted. If consent is given, we must take adequate measures to establish the source of wealth and funds involved.
Previously, PEPs only included citizens of foreign countries. From 2017, the definition of PEPs has been expanded to include citizens of the UK too.
Country risk issues
Caution should be applied throughout the conduct of the matter where the client or another party to the transaction is from a country regarded as high-risk. This includes countries known for poor money laundering controls or government corruption.
Information on such countries is compiled by a number of international organisations, such as the Financial Action Task Force (“FATF”). In addition, countries and individuals may be subject to the UK sanctions regime.
Additional checks should be performed where you identify that there are other risks about the client or the matter which may put us on notice of the possibility of money laundering or terrorist financing. Examples include:
secrecy, unusual behaviour or unusual requests
no apparent commercial purpose to the proposed transaction
unexplained or unusual sources of finance or the use of cash
the use of complex structures, trusts, nominees or powers of attorney
The examples above do not necessarily amount to a suspicion of money laundering, but may cause sufficient concern about the risks to request additional information.