The key for a successful Financial Organisation and/or Administrative Service Provider is to have a completed and accurate profile for each new and existing client they have a business relationship with.
In this way, the Organisation shall be able to monitor, assist and operate effectively and in compliance with its Country’s Laws and Directives. In Cyprus, every Financial Organisation and all Administrative Service Providers must comply with the Legislation for the Prevention of Money Laundering and Terrorist Financing and the Directives issued by the Cyprus Securities and Exchange Commission (CySEC – Directive DI144-2007-08 of 2012).
It is an obligation for every Financial Organisation to follow identification and due diligence procedures so as to establish a well-structured relationship with its clients. The customer identification records should be fully updated at all times and the validity and adequacy of those should be examined on a regular basis and the timeframe of this examination shall be prioritised according to the risk categorisation of each client. The outcome of the examination and procedures should be recorded and saved in each client’s file respectively. However, if at any time, regardless of the timeframe for the next review the Organisation decides that the documents obtained are inadequate and/or information are missing then the Organisation needs to collect and save those documents and information the soonest possible.
When a new business relationship is about to commence with a client then the identification and due diligence procedures are straight forward to be followed and the necessary documentation and information shall be requested at the start of the contact. Nevertheless, when the relationship concerns an existing client then the necessary documents and information shall be collected in cases when:
- An important transaction takes place and especially if this transaction appears to be unusual or differ from the transactions conducted on a regular basis.
- When the legal status and the structure of the company changes (e.g. Change of Company Directors, Company Secretaries, Company Shareholders, Beneficial Owners, registered office, trustees, company’s name, trading patterns, business activities).
- When there are changes in the way the client’s account operates (e.g. change of authorised persons, new bank accounts).
- When the customers conduct transactions that favour anonymity. This could mean transactions that take place via internet or telephone or via any other electronic method that prevent from knowing who is actually conducting these transactions.
As mentioned above, the identification and due diligence procedures are mandatory and need to be in compliance with all new and existing clients. This is why there are consequences when there is failure or refusal on behalf of the client to submit the required information for his/her verification to the Financial Organisation and Service Provider. In the case of new business relationships or transactions, the consequences could be the creation of the suspicion that the client might be involved in illegal activities such as money laundering or terrorist financing with the result of the Organisation not to proceed with the establishment of the business relationship or transaction and even result in considering a potential report to MOKAS by the company’s Compliance Officer – MOKAS is the Unit in which suspicious reporting for money laundering or terrorist financing should be submitted. In cases of existing clients, if the client fails or refuses to submit the required documentation to the Organisation for his/her verification then the business relationship or transaction should be terminated and even result in considering a potential report to MOKAS by the company’s Compliance Officer.
Given all of the above, the construction of a customer’s economic profile should consist of information related to the persons involved in the Company’s structure and in the Company itself so as to identify and confirm that the Client is indeed who they claim to be and the Company’s activities are indeed as initially described by the client.
All the documents provided to the Organisation must be based on reliable source and issued by legal authorities so as not to be able to modify them for any reason. Every client needs to present sufficient documentation for his/her identification and residential/business address. However, it is never guaranteed that the identity presented is genuine. This is the reason why it is never acceptable by the law to use the same document for verifying both the ID and the residential address of a person. Two different legal documents shall be requested and presented at all times.
The documents and information required to be collected before the establishment of a new business relationship between a Financial Institution and Service Provider and a Client shall consist of the purpose and the reasons for requesting this business relationship, the anticipated company turnover, the nature of the company account transactions, the origin of the incoming funds and the destination of the outgoing funds, the size of the client’s wealth and the estimated annual income and finally a detailed description of the company’s business activities.
Following the above, in order to have a complete economic profile the Organisation also needs to obtain information such as the company name, country of incorporation and head office address, personal information relating to the Company’s Beneficial Owners, Company Directors, Company Shareholders and Authorised Signatories. In cases where the Client is a member of a group then additional financial and identification information shall be requested for the group.
As a summary to the above, all information and verifications shall be gathered and saved in a client’s designated folder system respectively and needs to be obtained for all new and existing clients. It is essential for each Financial Organisation and Administrative Service Provider to have a complete and fully updated economic profile for each client and keep this profile and all the information and identification verifications saved and fully updated on a regular basis. Based on that a smooth cooperation with each client shall be conducted, all transactions shall be monitored and any suspicion or change will be easily identified. The preparation and maintaining of an economic profile for each and every client shall assist all Financial Institutions & Administrative Service Providers to be fully compliant with the EU Laws and Directives and all Clients should be able to provide all of the above information at any time requested.