- What is “Customer Due Diligence”?
The Money Laundering Regulations require you to carry out “customer due diligence” (“CDD”) when you do regulated work. This involves several elements.
- Client identification.
- Identifying the person who instructs us on behalf of an entity (such as a person who represents a company) and checking they are authorised so to act.
- Identifying any beneficial owners where the client is a company or trust.
- Assessing the purpose and intended nature of the business relationship or transaction and where necessary obtaining information on that subject.
- Assessing risk. CDD and ongoing monitoring must be done on a risk-sensitive basis. Assessing risk includes checking if a client or beneficial owner may be “politically exposed” (see the note below on that subject).
- Ongoing monitoring of the business relationship, including where necessary the source of funds.
- The Importance of Thorough CDD
2.1 Our reputation is our greatest asset. Thorough CDD will not only ensure compliance with the law, but will tend to deter undesirable clients from instructing this firm.
2.2 When taking instructions from new clients, explain our obligation to do due diligence, and the reason for that obligation. Where appropriate ask questions about the source of the client’s wealth, and how any transaction is to be financed. Few honest clients will resent such questions. Our Money Laundering Statement explains our CDD obligations, and you may wish to draw that explanation to clients’ attention
Explain to clients that the Firm’s policy is that we do not accept money in cash save for money for our fees and disbursements, and then up to a limit of £500 in any 28 day period. This rule is explained in our client care letter. If anyone asks you to accept more than £500 in cash in any 28 day period, you should normally report the request to the MLRO.
- The CDD Form
(This requirement does not apply to crime, community law and child care work)
- The firm has devised a CDD Form (attached, FORM A), to help you to carry out due diligence in an organised and reliable manner. It includes detailed notes. You must always complete the form. For the avoidance of doubt this applies both:
- when taking on a new client, and
- when opening a new matter file for an existing client (whenever you open a file, you should complete a fresh CDD form even if we have previously checked ID). This is to record the risk assessment which is a requirement under the new regulations.
Even in cases where we routinely act on similar matters for the same client there should be a CDD form to record whether the matter is considered low medium or high risk. (See Section E regarding Risk assessment).
- You must also run fresh checks and fill in the form again if:
- the client’s risk profile has changed significantly (especially if it is a company or other entity),
- if there is any indication that the beneficial owner of a client has changed, or
- if you suspect money laundering, or doubt the veracity of due diligence documents previously supplied.
- Where the previous evidence of identity is more than 3 years old
4.3 The completed form, along with evidence of identity, should be filed in the firm’s central records which are kept in TFB. You must open a progress file titled ‘CDD’ in each case, file the CDD form and either
- File certified copies of ID and verification of address; or
- Indicate where such information can be found within TFB
4.4 You must also send to the firm’s MLRO the CDD form and evidence of ID and address in the following cases:
- Where the client is resident overseas for all or part of a year
- Clients who are not UK registered companies
- Trusts or unincorporated organisations.
- Where you have any suspicions of money laundering