6.3.1. Obligation to verify and understand

In conducting CDD required by AML 6.1.1,a Relevant Person must:

1. (a) verify the identity of the customer and any person acting on behalf of the customer, including his authorisation to so act, based on original or properly certified documents, data or information issued by or obtained from a reliable and independent source;
2. (a-a)  verify the identity of any beneficial owner(s) of the customer;
3. (b)obtain information on and understand the purpose and intended nature of the business relationship;
4. (c)understand the customer's sources of funds;
5. (d)understand the customer's sources of wealth; and
6. (e)conduct on-goingdue diligence of the customer business relationship under AML 6.4.1.

6.3.2. Customer obligation for life insurance

In complying with AML 6.3.1 for life insurance or other similar policies, a Relevant Person must:

1. (a)verify the identity of customers as soon as reasonably practicable before or during the establishment of a business relationship and when transactions for occasional customers are being conducted;
2. (a-a)  verify the identity of any named beneficiaries of the insurance policy at the time of pay-out;
3. (b)verify the identity of the persons in any class of beneficiary, or where these are not identifiable, ensure that it obtains sufficient information to be able to verify the identity of such persons at the time of pay-out;
4. (c)if a beneficiary of the insurance policy who is a legal person or a legal arrangement presents a higher risk, take enhanced measures which should include reasonable measures to identify and verify the identity of the beneficial owner of the beneficiary, at the time of pay-out;
5. (d)take reasonable measures to determine whether the beneficiaries of the insurance policy and/or, where required, the beneficial owner of the beneficiary, are PEPs, at the latest at the time of the pay-out, and, in cases of higher risks, inform senior management before the pay-out of the policy proceeds, conduct enhanced scrutiny on the whole business relationship with the policyholder, and consider making a STR; and
6. (e)include the beneficiary of a life insurance policy as a relevant risk factor in determining whether enhanced CDD measures are applicable.

6.3.3. Customer is a Politically Exposed Person

Where a customer, or a beneficial owner of the customer, is a PEP, a Relevant Person must ensure that, in addition to AML 6.3.1 it also:

1. (a) increases the degree and nature of monitoring of the business relationship, in order to determine whether the customer's transactions or activities appear unusual or suspicious; and
2. (b) obtains the approval of senior management to commence a business relationship with the customer.

Guidance on undertaking Customer Due Diligence

1. (a) A Relevant Person should, in complying with AML 6.3.1(a), and adopting the RBA, obtain, verify and record, for every customer who is a natural person, the following identification information:
2. (i) full name (including any alias);
3. (ii) date of birth;
4. (iii) nationality;
5. (iv) legal domicile; and
6. (v) current residential address (not a P.O. box).
7. (b) Items (i) to (iii) above should be obtained from a current valid passport or, where a customer does not possess a passport, an official identification document which includes a photograph. The concept of domicile generally refers to the place which a person regards as his permanent home and with which he has the closest ties or which is his place of origin.
8. (c) A Relevant Person should, in complying with AML 6.3.1(a), and adopting the RBA, obtain, verify and record, for every customer which is a legal person, the following identification information:
9. (i) full business name and any trading name;
10. (ii) registered or business address;
11. (iii) date of incorporation or registration;
12. (iv) place of incorporation or registration;
13. (v) a copy of the certificate of incorporation or registration;
14. (vi) a valid commercial or professional licence;
15. (vii) the identity of the directors, partners, trustees or equivalent persons with executive authority of the legal person or who holds the position of senior managing official; and
16. (viii) for a trust, a certified copy of the trust deed to ascertain the nature and purpose of the trust and documentary evidence of the appointment of the current trustees.
17. (d) In complying with AML 6.3.1(a), it may not always be possible to obtain original documents. Where identification documents cannot be obtained in original form, for example, because a Relevant Person has no physical contact with the customer, the Relevant Person should obtain a copy certified as a true copy by a person of good standing such as a registered lawyer or notary, a chartered accountant, a bank manager, a police officer, an employee of the person's embassy or consulate, or other similar person. Downloading publicly available information from an official source (such as a regulator or government website) is sufficient to satisfy the requirements of AML 6.3.1(a) CDD information and research obtained from a reputable company or informationreporting agency may also be acceptable as a reliable and independent source, as would banking references and, for lower risk customers, information obtained from researching reliable and independent public information found on the internet or on commercial databases.
18. (e) For higher risk situations, identification information is to be independently verified, using both public and non-public sources.
19. (f) In complying with AML 6.3.1(b) a Relevant Person is required to "understand" a customer's source of funds. This means understanding where the funds for a particular service or transaction will come from (e.g. a specific bank or trading account held with a specific financial institution) and whether that funding is consistent with the customer's source of wealth. The best way of understanding the source of funds is by obtaining information directly from the customer, which will usually be obtained during the onboarding process. The Relevant Person should keep appropriate evidence of how they were able to understand the source of funds, for example, a copy of the customer account opening form, customer questionnaire or a memo of a call with the relationship manager at a financial institution.
20. (g) In complying with AML 6.3.1(c) a Relevant Person is required to "understand" a customer's source of wealth. For a natural person, this might include questions about the source of wealth in an application form or customer questionnaire. The understanding may also be gained through interactions with the relationship manager at a financial institution. It could also be gained by obtaining information from a reliable and independent publicly available source, for example, from published accounts or a reputable news source. The understanding need not be a dollar for dollar account of the customer's global wealth, but it should provide sufficient detail to give the Relevant Person comfort that the customer's wealth is legitimate and also to provide a basis for subsequent on-going due diligence. The understanding of the customer's source of wealth should be clearly documented.
21. (h) Understanding a customer's sources of funds and wealth is also important for the purposes of undertaking on-going due diligence under AML 6.3.1(d) Initial funding of an account or investments from an unknown or unexpected source may pose a money laundering risk. Similarly, a sound understanding of the customer's source of funds and wealth also provides useful information for a Relevant Person's transaction monitoring programme.
22. (i) An insurance policy which is similar to a life policy would include life-related protection, or a pension, or investment product which pays out to the policy holder or beneficiary upon a particular event occurring or upon redemption.

Guidance on identification and verification of beneficial owners

1. (a) In determining whether an individual meets the definition of a beneficial owner or controller, regard should be had to all the circumstances of the case.
2. (b) When identifying beneficial owners, a Relevant Person is expected to adopt a substantive (as opposed to form over substance) approach to CDD for legal persons. Adopting a substantive approach means focusing on the money laundering risks of the customer and the product/service and avoiding an approach which focusses purely on the legal form of an arrangement or sets fixed percentages at which beneficial owners are identified (or not).
3. (c) A Relevant Person should take all reasonable steps to establish and understand a corporate customer's legal ownership and control and to identify the beneficial owner. There are no explicit ownership or control thresholds in defining the beneficial owner because the applicable threshold to adopt will ultimately depend on the risks associated with the customer, and so a Relevant Person must adopt the RBA and pursue on reasonable grounds an approach which is proportionate to the risks identified. A Relevant Person should not set fixed thresholds for identifying the beneficial owner without objective and documented justification. An overly formal approach to defining the beneficial owner may result in a criminal "gaming" the system by always keeping his financial interest below the relevant threshold.
4. (d) In some circumstances no threshold should be used when identifying beneficial owners because it may be important to identify all underlying beneficial owners to ensure that they are not associated or connected in some way. This may be appropriate where there are a small number of investors in an account or fund, each with a significant financial holding and the customer-specific risks are higher. However, where the customer-specific risks are lower, a threshold can be appropriate. For example, for a low-risk corporate customer which, combined with a lower-risk product or service, a percentage threshold may be appropriate for identifying "control" of the legal person for the purposes of the definition of a beneficial owner.
5. (e) For a retail investment fund, which is widely-held and where the investors invest via pension contributions, the manager of the fund is not expected to look through to underlying investors where there are none with any material control or ownership levels in the fund. However, for a closely-held fund with a small number of investors, each with a large shareholding or other interest, a Relevant Person should identify and verify each of the beneficial owners, depending on the risks identified as part of its risk-based assessment of the customer.
6. (f) Where a Relevant Person carries out identification and verification in respect of actual and potential beneficial owners of a trust, this should include the trustee, settlor, the protector, the enforcer, beneficiaries, other persons with power to appoint or remove a trustee and any person entitled to receive a distribution, whether or not such person is a named beneficiary.
7. (g) Where no natural person is identified as a beneficial owner, the relevant natural person who holds the position of senior managing official should be identified as such and verified.

Guidance on Politically Exposed Persons

1. (a) Individuals who have, or have had, a high political profile, or hold, or have held, public office, can pose a higher money laundering risk to a Relevant Person as their position may make them vulnerable to corruption. This risk also extends to members of their families and to their close associates. PEP status itself does not incriminate individuals or entities. It does, however, put the customer into a higher risk category.
2. (b) Generally, a foreign PEP presents a higher risk of money laundering because there is a greater risk that such person, if he/she was committing money laundering, would attempt to place his/her money offshore where the customer is less likely to be recognised as a PEP and where it would be more difficult for law enforcement agencies in his/her home jurisdiction to confiscate or freeze his/her criminal property.
3. (c) Corruption-related money laundering risk increases when a Relevant Person deals with PEPs. Corruption may involve serious crimes and has become the subject of increasing global concern. Customer relationships with family members or close associates of PEPs involve similar risks to those associated with PEPs themselves.
4. (d) After leaving office PEPs may remain a higher risk for money laundering if they continue to exert political influence, directly or indirectly, or otherwise pose a risk of corruption.

6.3.4. Existing customer becoming a Politically Exposed Person

A Relevant Person must not continue its business relationship with an existing customer if the customer (or a beneficial owner of the customer) becomes a PEP, unless the Relevant Person obtains the approval of its senior management.

Guidance on conducting Customer Due Diligence

1. (a)A Relevant Person should, in complying with AML 6.3.1(a),and adopting the RBA, obtain, verify and record, for every customer who is a natural person, the following identification information:
2. (i)full name (including any alias);
3. (ii)date of birth;
4. (iii)nationality;
5. (iv)legal domicile; and
6. (v)current residential address (not a P.O. box).
7. (b)Items (i) to (iii) above should be obtained from a current valid passport or, where a customer does not possess a passport, an official identification document which includes a photograph. The concept of domicile generally refers to the place which a person regards as his permanent home and with which he has the closest ties or which is his place of origin.
8. (c)A Relevant Person should, in complying with AML 6.3.1(a),and adopting the RBA, obtain, verify and record, for every customer which is a legal person, the following identification information:
9. (i)full business name and any trading name;
10. (ii)registered or business address;
11. (iii)date of incorporation or registration;
12. (iv)place of incorporation or registration;
13. (v)a copy of the certificate of incorporation or registration;
14. (vi)a valid commercial or professional licence;
15. (vii)the identity of the directors, partners, trustees or equivalent persons with executive authority of the legal person or the relevant natural person who is a member of senior management; and 
16. (viii)for a trust, a certified copy of the trust deed to ascertain the nature and purpose of the trust and documentary evidence of the appointment of the current trustees.
17. (d)In complying with AML 6.3.1(a),it may not always be possible to obtain original documents. Where identification documents cannot be obtained in original form, for example, because a Relevant Person has no physical contact with the customer, the Relevant Person should obtain a copy certified as a true copy by a person of good standing such as a registered lawyer or notary, a chartered accountant, a bank manager, a police officer, an employee of the person's embassy or consulate, or other similar person. Downloading publicly-available information from an official source (such as a regulator or government website) is sufficient to satisfy the requirements of AML 6.3.1(a) CDD information and research obtained from a reputable company or information- reporting agency may also be acceptable as a reliable and independent source, as would banking references and, for lower risk customers, information obtained from researching reliable and independent public information found on the internet or on commercial databases.
18. (e)For higher risk situations, identification information is to be independently verified, using both public and non-public sources.
19. (f)In complying with AML 6.3.1(c)a Relevant Person is required to "understand" a customer's source of funds. This means understanding where the funds for a particular service or transaction will come from (e.g. a specific bank or trading account held with a specific financial institution) and whether that funding is consistent with the customer's source of wealth. The best way of understanding the source of funds is by obtaining information directly from the customer, which will usually be obtained during the on-boarding process. The Relevant Person should keep appropriate evidence of how they were able to understand the source of funds, for example, a copy of the customer account opening form, customer questionnaire or a memo of a call with the relationship manager at a financial institution.
20. (g)In complying with AML 6.3.1(d)a Relevant Person is required to "understand" a customer's source of wealth. For a natural person, this might include questions about the source of wealth in an application form or customer questionnaire. The understanding may also be gained through interactions with the relationship manager at a financial institution. It could also be gained by obtaining information from a reliable and independent publicly available source, for example, from published accounts or a reputable news source. The understanding need not be a dollar for dollar account of the customer's global wealth, but it should provide sufficient detail to give the Relevant Person comfort that the customer's wealth is legitimate and also to provide a basis for subsequent on-going due diligence. The understanding of the customer's source of wealth should be clearly documented.
21. (h)Understanding a customer's sources of funds and wealth is also important for the purposes of conducting on-going due diligence under AML 6.3.1(e) Initial funding of an account or investments from an unknown or unexpected source may pose a money laundering risk. Similarly, a sound understanding of the customer's source of funds and wealth also provides useful information for a Relevant Person's transaction monitoring programme.
22. (i)An insurance policy which is similar to a life policy would include life-related protection, or a pension, or investment product which pays out to the policy holder or beneficiary upon a particular event occurring or upon redemption.

Guidance on identification and verification of beneficial owners

1. (a)In determining whether an individual meets the definition of a beneficial owner or controller, regard should be had to all the circumstances of the case.
2. (b)When identifying beneficial owners, a Relevant Person is expected to adopt a substantive (as opposed to form over substance) approach to CDD for legal persons. Adopting a substantive approach means focusing on the money laundering risks of the customer and the product/service and avoiding an approach which focusses purely on the legal form of an arrangement or sets fixed percentages at which beneficial owners are identified (or not).
3. (c)A Relevant Person should take all reasonable steps to establish and understand a corporate customer's legal ownership and control and to identify the beneficial owner. An approach based only on defined thresholds without regard to the relevant risks in defining the beneficial owner may result in inadequate determination of beneficial ownership, for example, a criminal "gaming" the system by always keeping his financial interest below the relevant threshold.
4. A Relevant Person must consider a customer’s risk rating and the source of funds when reviewing transactions as required by AML 6.4.1.
5. (d)In some circumstances no threshold should be used when identifying beneficial owners because it may be important to identify all underlying beneficial owners to ensure that they are not associated or connected in some way. This may be appropriate where there area small number of investors in an account or fund, each with a significant financial holding and the customer-specific risks are higher. However, where the customer-specific risks are lower, a threshold can be appropriate. For example, for a low-riskcorporate customer which, combined with a lower-risk product or service, a percentage threshold may be appropriate for identifying "control" of the legal person for the purposes of the definition of a beneficial owner.
6. (e)For a retail investment fund, which is widely-held and where the investors invest via pension contributions, the manager of the fund is not expected to look through to underlying investors where there are none with any material control or ownership levels in the fund. However, for a closely-held fund with a small number of investors, each with a large shareholding or other interest, a Relevant Person should identify and verify each of the beneficial owners, depending on the risks identified as part of its risk-based assessment of the customer.
7. (f)Where a Relevant Person carries out identification and verification in respect of actual and potential beneficial owners of a trust, the identification and verification should include the trustee, settlor, the protector, the enforcer, beneficiaries, other persons with power to appoint or remove a trustee and any person entitled to receive a distribution (whether or not such person is a named beneficiary). For legal arrangements other than a trust, the identification and verification should include persons in positions similar to those in a trust exercising ultimate effective control over the legal arrangement (including through a chain of control or ownership) and entitled to receive a distribution (whether or not such person is a named beneficiary).
8. (g)A Relevant Person should identify and take reasonable measures to verify the identity of the natural person(s) (if any) who ultimately has a controlling ownership interest in a legal person to the extent that there is doubt under verification as to whether the person(s) with the controlling ownership interest is the beneficial owner(s). If no natural person exerts control through ownership interests, the Relevant Person should identify and take reasonable measures to verify the identity of the natural person(s) (if any) exercising control of the legal person or arrangement through other means.
9. (h)Where no natural person is identified as a beneficial owner who ultimately has a controlling ownership interest (or who has control through other means) in a legal person, the relevant natural person who holds the position of a member of senior management should be identified as such and verified.

Guidance on Politically Exposed Persons

1. (a)Individuals who have, or have had, a high political profile, or hold, or have held, public office, can pose a higher money laundering risk to a Relevant Person as their position may make them vulnerable to corruption. This risk also extends to members of their families and to their close associates. PEP status itself does not incriminate individuals or entities. It does, however, put the customer into a higher risk category.
2. (b)Generally, a PEP presents a higher risk of money laundering because there is a greater risk that such person, if he/she was committing money laundering, would attempt to place his/her money offshore where the customer is less likely to be recognised as a PEP and where it would be more difficult for law enforcement agencies in his/her home jurisdiction to confiscate or freeze his/her criminal property.
3. (c)Corruption-related money laundering risk increases when a Relevant Person deals with PEPs. Corruption may involve serious crimes and has become the subject of increasing global concern. Customer relationships with family members or close associates of PEPs involve similar risks to those associated with PEPs themselves.
4. (d)After leaving office PEPs may remain a higher risk for money laundering if they continue to exert political influence, directly or indirectly, or otherwise pose a risk of corruption.