r.16 Enhanced customer due diligence

(1) A reporting entity shall, in addition to the customer due diligence measures required under section 35 of the Act, apply on a risk-sensitive basis enhanced customer due diligence measures and enhanced ongoing monitoring in any other situation which by its nature presents a higher risk of money laundering, terrorist financing activities or other criminal conduct, or in respect of a business relationship with persons from, and transactions in, countries which do not apply or fully apply the Financial Action Task Force Recommendations.
(2) While assessing whether there is a high degree of risk of money laundering or terrorist financing in a particular situation, and the extent to which it is appropriate to apply enhanced customer due diligence measures in that situation, the reporting entity shall take into account specific risk factors including, amongst others—
(a) customer risk factors, including whether the—
(i) business relationship is conducted in unusual circumstances;
(ii) customer is a resident or is transacting in a geographical area of high risk;
(iii) customer is a legal person or legal arrangement that is a vehicle for holding personal assets;
(iv) customer or potential customer, is a politically exposed person as per section 36 of the Act;
(v)

customer is a company that has nominee shareholders or shares in bearer form;

(vi) customer is a business that is cash intensive;
(vii) corporate structure of the customer is unusual or excessively complex given the nature of the company’s business;
(viii) customer is a foreign financial institution or non-bank financial institution;
(ix) customer is a non-profit organisation (hereinafter referred to as the NPO);
(x) customer is a professional service provider; and
(xi) customer is or is associated with a high net worth individual;

(b) product, service, transaction or delivery channel risk factors, including whether the—
(i) payments are being received from un-associated third parties;
(ii) service involves the provision of directorship services or nominee shareholders;
(iii) situation involves non-face-to-face business relationship or transactions without the necessary safeguards, specified by relevant supervisory authorities through the directions or guidelines;
(iv) situation involves reliance on regulated person under section 42 of the Act;
(v) product involves private banking;
(vi) product or transaction is one which might favour anonymity;
(vii) new products and new business practices are involved, including new delivery mechanisms, and the use of new or developing technologies for both new and pre-existing products;
(viii) product or service enables significant volumes of transactions to occur rapidly;
(ix) product or service allows the customer to engage in transactions with minimal oversight by the institution;
(x) product or service has a high transaction or investment value; and
(xi) product or service has unusual complexity;
(c) geographical risk factors, include—
(i) the countries identified by credible sources, such as mutual evaluations, detailed assessment reports or published follow-up reports, as not having effective systems to counter the money laundering or terrorist financing activities;
(ii) the countries identified by credible sources such as mutual evaluations, detailed assessment reports or published follow-up reports, as having significant levels of corruption or other criminal activity, such as terrorist financing activities, money laundering and the production and supply of illicit drugs;
(iii) the countries subjected to sanctions, embargos or similar measures issued by the European Union or the United Nations and countries that feature on non-compliant lists (black and grey lists);
(iv) the countries providing funding or support for terrorism or have designated terrorist organisations operating within their country; and
(v) other countries identified by the reporting entity as higher-risk because of its prior experiences or other factors.
(3) Where a reporting entity applies enhanced customer due diligence, in addition to retaining sufficient information in order to demonstrate that the particular business relationship or transaction presents a higher degree of risk of money laundering and terrorist financing, it shall—

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(a) adjust the extent, or type of measures it undertakes to reflect the higher risk identified under subregulation (2); and
(b) carry out enhanced on-going monitoring of any business relationship or transactions which are subject to those measures to enable it to identify any unusual or suspicious activities or transactions.
(4) Enhanced customer due diligence measures required under this regulation, include—
(a) obtaining the approval of senior management before a business relationship is established with the customer;
(b) taking adequate measures to establish the source of wealth and source of funds which are involved in the proposed business relationship or one-off transaction;
(c) seeking additional independent, reliable sources, to verify information provided or made available to the reporting entity;
(d) taking additional measures to understand the background, ownership and financial situation of the customer and other parties to the transaction;
(e) taking further steps to satisfy that the transaction is consistent with the purpose and intended nature of the business relationship;
(f)

increasing the monitoring of the business relationship, including greater scrutiny of transactions; and

(g) applying such other measures provided in the guidelines issued by the respective supervisory authorities to identify the higher risk of money laundering, terrorist financing activities or other criminal conduct.
(5) In the case, where the customer is an NPO associated with a high-risk jurisdiction or in any other case which by the nature of its activities may present a higher risk of money laundering and terrorist financing or any other criminal conduct, the reporting entity shall determine—
(a) that the NPO is properly licensed or registered;
(b) the adequacy of the NPO’s anti-money laundering and countering the financing of terrorism policies, procedures and controls;
(c) the NPO’s legal, regulatory and supervisory status including requirements relating to regulatory disclosure, accounting, financial reporting and audit;
(d) the NPO’s ownership and management structure, to include the possibility of politically exposed person’s involvement;
(e) the nature and scope of the NPO’s activities, nature of its donor base, and the beneficiaries of its activities and programs; and
(f)

thorough background checks on the NPO’s key persons, senior management, branch or field managers, major donors and major beneficiaries and to screen for possible matches with targeted and other international financial sanctions lists, indications of criminal activity or any other adverse information.