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8.1. Conduct of Simplified Due Diligence
FINANCIAL SERVICES LEGISLATION
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8.1. Conduct of Simplified Due Diligence

8.1.1. Modifications to AML 6.3.1 for Simplified Due Diligence

Where a Relevant Person is permitted to conduct SDD under AML 6.1.2, modification of AML 6.3.1 may include:

  1. (a) verifying the identity of the customer and identifying any beneficial owners after the establishment of the business relationship;
  2. (b) deciding to reduce the frequency of, or as appropriate not undertake, customer identification updates;
  3. (c) deciding not to verify an identified beneficial owner;
  4. (d) deciding not to verify an identification document other than by requesting a copy;
  5. (e) not enquiring as to a customer's source of funds or source of wealth;
  6. (f) reducing the degree of on-going monitoring of transactions, based on a reasonable monetary threshold or on the nature of the transaction; or
  7. (g) not collecting specific information or carrying out specific measures to understand the purpose and intended nature of the business relationship, but inferring such purpose and nature from the type of transactions or business relationship established.

8.1.2. Proportionality

The modification in AML 8.1.1 must be proportionate to the customer's money laundering risks. Guidance on Simplified Due Diligence

  1. (a) AML 8.1.1 provides examples of SDD measures. Other measures may also be used by a Relevant Person to modify CDD in accordance with the customer risks.
  2. (b) A Relevant Person should not use a "one size fits all" approach for all its low risk customers. Notwithstanding that the risks may be low, the degree of CDD conducted needs to be proportionate to the specific risks identified on a case by case basis. For example, for customers where the money laundering risks are very low, a Relevant Person may decide simply to identify the customer and verify such information only to the extent that this is commercially necessary. On the other hand, a low risk customer which is undertaking a complex transaction might require more comprehensive SDD.
  3. (c) For the avoidance of doubt, a Relevant Person is always required to identify beneficial owners, except for retail investment funds which are widely held, and investment funds where the investor invests via pension contributions. However, a Relevant Person may decide not to verify beneficial owners of a low risk customer.
  4. (d) An example of circumstances where a Relevant Person might reasonably reduce the frequency of or, as appropriate, eliminate customer identification updates would be where the money laundering risks are low and the service provided does not offer a realistic opportunity for money laundering.
  5. (e) An example of where a Relevant Person might reasonably reduce the degree of on-going monitoring and scrutinising of transactions, based on a reasonable monetary threshold or on the nature of the transaction, would be where the transaction is a recurring, fixed contribution to a savings scheme, investment portfolio or fund or where the monetary value of the transaction is not material for money laundering purposes given the nature of the customer and the transaction type.