Enhanced Due Diligence and Sanctions

Enhanced Due Diligence

When dealing with individuals or companies established in high-risk jurisdictions, or exposed to other cases of high risk, organisations are required to apply Enhanced Due Diligence measures to manage and mitigate those risks appropriately.

Anti-money-laundering directives state that organisations to reasonably assess as far as possible, the background and purpose of all complex and unusually large transactions.  For example, any unusual transaction patterns, which do not have any economic or lawful appearance.

How we can help:

Our Enhanced Due Diligence meets financial regulatory requirements as well as setting “good governance” in other industries:

  • Engage trusted local on-the-ground and human sources which provides an additional level of assurance that online sources cannot.
  • Determine an individuals’ integrity, ability, reputation, and possible exposure to sanctions lists and litigation.
  • Examine different and independent sources of information with a specific focus on identifying factors that could damage the reputation of the client.
  • Provide assurance that an individual is a suitable candidate to act as an investor, director or senior hire for the organisation.
  • Determine whether an individual is in a higher-risk category and to consider whether additional industry insight or business intelligence research from independent sources are required.
  • Perform industry insight interviews and regulatory references in an endeavour to ascertain insight into the individual’s professional character, source of wealth and additional questioning.
  • Provide clients with accurate and detailed intelligence they can use to confidently make business decisions.

Good financial crime compliance requires organisations to introduce a risk-based approach to customer and enhanced due diligence.  When assessing the risks of money laundering and terrorist financing, organisations should check whether any high-risk factors apply.

If your organisation engages with individuals or companies established in high-risk jurisdictions, or are exposed to other cases of high risk, we can help identify the areas of risk and apply enhanced due diligence measures to manage and mitigate those risks appropriately.

Specifically, we help identify:

  • whether business relationships are conducted in unusual circumstances
  • customers that operate in geographical areas of higher risk, including areas of non AML/CTF legislation, significant levels of corruption, countries subject to UN sanctions and/or countries harbouring designated terrorist organisations
  • whether individuals are using personal asset-holding vehicles
  • customers who only have nominee shareholders or shares
  • if customers are cash-intensive
  • ownership structures of customers which appear unusual or excessively complex given the nature of their business
  • whether business relationships are based on anonymity
  • if the organisation received funds from unknown parties

Ultimate Beneficial Owners (UBOs)

The need for accurate, audited and up-to-date information on beneficial owners is a powerful tool in deterring financial crime activity. In addition, it helps identify those who hide their identity behind corporate structures.

A beneficial owner means any natural person or persons who ultimately owns or controls the company.  Most Anti-Money Laundering directives state that a shareholding of 25% or more, whether it be a natural person or corporate entity, shall be an indication of direct ownership.  Depending on an organisation’s risk-based approach, a lower percentage can be set depending on their criteria.

In exceptional cases, organisations having exhausted all other means of identification and provided there are no grounds for suspicion, may consider the senior managing officials to be the beneficial owners.

How we can help:

As part of the risk-based approach, we help organisations reduce the likelihood of financial crime;

  • identify the customer and verify the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source
  • take reasonable measures to verify the beneficial owner’s identity
  • take reasonable measures to understand the ownership and control structure of the customer
  • verify the control structure and ultimate beneficial owner
  • conduct ongoing monitoring of the business relationship including scrutiny of transactions undertaken throughout the course of that relationship to ensure compliance
  • verify that any person purporting to act on behalf of the customer is authorised and identify and verify the identity of that person

Politically Exposed Persons (PEPs)

With respect to transactions or business relationships, organisations must implement appropriate risk-based procedures to determine whether the customer or the beneficial owner of the customer, is a Politically Exposed Person (PEP).

We help organisations satisfy PEP compliance, and:

  • check and verify sanction lists and registers to identify PEPs, close associates and subjects of interest
  • establish the source of wealth or funds that are involved in business relationships or transactions with PEPs
  • conduct enhanced, ongoing monitoring of business relationships with PEPs

Notes:

If a PEP is no longer entrusted with a prominent public role, organisations are still obliged for a period of at least 12 months, to continue enhanced due diligence with respect to the PEP. This period is until such a time that the PEP is deemed to pose no further risk.

EU Directive measures are of a preventative and not criminal nature. They are not be interpreted as categorising a PEP as being involved in criminal activity. Although PEPs are considered a risk due to their public life making them vulnerable to corruption, organisations must not simply refuse a business relationship on the basis that he or she is a PEP, as this is contrary to the ethos of the Directive.

EU Directive measures also apply to family members or persons known to be close associates to the PEP.

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