Identity verification over the course of the business relationship: Comments and recommendations by the NBB
1. Target situations
Article 37 of the Anti-Money Laundering Law requires financial institutions to adopt enhanced due diligence measures with regard to certain business relationships that have been established even though not all due diligence obligations were fulfilled, in the following cases:
- when a financial institution has made use of the possibility of derogation provided for in Article 31 of the Anti-Money Laundering Law and deferred verification of the identity of a customer (or, where appropriate, of his agent(s) or beneficial owner(s)) with whom a business relationship has been established recently, in a situation provided for by its internal procedures in which it is essential not to interrupt the conduct of business.In that case, the business relationship and the transactions carried out during it should be subject to enhanced due diligence until the identities of all the persons concerned have been verified;
- when a financial institution has implemented one of the measures as an alternative to terminating the business relationship that are authorised by the NBB in Article 15 of its Regulation:
- either because the financial institution has made use of the possibility of derogation provided for in Article 31 of the Anti-Money Laundering Law and deferred verification of the identity of a customer (or, where appropriate of his agent(s) or beneficial owner(s)) with whom a business relationship has been established recently, in a situation provided for by its internal procedures in which it is essential not to interrupt the conduct of business, and because it is unable to verify the identities of the persons involved as soon as possible after first contact with the customer (case referred to in Article 33, § 1, of the Law);
- or because it finds, during the business relationship, that it can no longer fulfil its ongoing due diligence obligation with regard to the transactions carried out by the customer or update the data and information pertaining to the persons involved or the characteristics of the relationship (case referred to in Article 35, § 2).
In these situations, since the Law in principle requires that the business relationship (which, by definition, has already been established) be terminated, financial institutions should adopt enhanced due diligence measures in addition to the measures applied as an alternative to ending the business relationship in accordance with Article 15 of the Anti-Money Laundering Regulation of the NBB.
2. Enhanced due diligence measures
The enhanced due diligence measures to be implemented pursuant to Article 37 of the Anti-Money Laundering Law should be proportionate with the reassessed risk level, in accordance with Article 19, § 2, of the Law. For more information on this subject, see the page “General commentary on cases of enhanced due diligence”, the content of which is taken from the Explanatory Memorandum of the Anti-Money Laundering Law. .
The NBB recommends determining the intensity of the due diligence measures to be implemented in the institution’s internal procedures, depending on whether there are other factors indicative of high risk associated with the transaction or business relationship, in accordance with the individual risk assessment required by the aforementioned Article 19 of the Law (see the page “Individual risk assessment”). To that end, all characteristics of the transaction or business relationship should be taken into consideration, particularly its nature and purpose and the amounts involved.
Generally, pending verification of the identity of the persons involved, the specific framework of the business relationship should include a set of coherent measures which drastically limit the possibilities offered to the customer in the context of this business relationship during this period. For example, it could be envisaged deferring the settlement of the transactions, limiting the sources of funding for the account opened to a single other bank account opened in name of the customer with a credit institution established in the EEA or in an equivalent third country, etc.
If one of the measures as an alternative to terminating the business relationship referred to in Article 15 of the Anti-Money Laundering Regulation of the NBB is applied, the additional enhanced due diligence measures to be adopted should be determined taking into account that this relationship has not been ended. The enhanced due diligence measures should in particular enable the financial institution, in that case, to ensure that the restrictions imposed on the business relationship are actually implemented and complied with.
3. Reporting to the AMLCO
It should be highlighted that, as soon as there could be indications of ML/FT, (i) any anomaly in the functioning of a business relationship for which a financial institution has made use of the possibility of derogation referred to in Article 31 of the Anti-Money Laundering Law and deferred verification of the identities of the persons involved and, in the same situation, (ii) any anomaly in the verification process, including an inability to verify the identities of the persons concerned as soon as possible after first contact with the customer, as well as (iii) any inability to continue fulfilling the ongoing due diligence obligation during a business relationship or to update the information pertaining to the persons involved and the characteristics of the business relationship concerned, should be considered an “atypical fact” and be subject to a specific analysis and documented in an internal report under the responsibility of the AMLCO in accordance with Article 46 of the Law to determine whether a suspicion should be reported to CTIF-CFI (see Articles 37, § 1, and 35, § 2, second paragraph, of the Law).
This implies that the aforementioned anomalies or inability should first be established and reported to the AMLCO, the details of which should be specified in the internal procedures adopted by the financial institution pursuant to Article 8 of the Anti-Money Laundering Law (for more information on this subject, see the page “Policies, procedures, processes and internal control measures” and point 1.4 of the page “Due diligence on business relationships and occasional transactions and detection of atypical facts and transactions”).
4. Internal control measures
Financial institutions are expected to periodically and permanently monitor the adequacy of the organisational measures implemented to comply with the enhanced due diligence measures for the verification of the identity of the persons involved in a business relationship during the said relationship or for implementing measures as an alternative to ending a business relationship. In this respect, the NBB expects the internal audit function in particular to pay specific attention to the adequacy and effectiveness of the enhanced due diligence measures adopted by the financial institutions.
Disclaimer: This English text is an unofficial translation and may not be used as a basis for resolving any dispute.