Customer Due Diligence

NB “Customer Due Diligence” is not just a question of identification, but of being comfortable with the client’s business as it will impinge on your own business.  If in doubt, do not proceed to a business relationship.  Most members will have had to sit through a series of questions like those below when engaging a solicitor; they should be answered to the best of your ability, so that a risk assessment can be made.

 

Anti-money laundering – client due diligence and risk assessment:

Some suggested questions to ask and notes to make before taking on the engagement

 

Note the original date your firm was appointed, or from which it is intended to take up appointment.  If you decide (or advise a more senior manager, where necessary) that the engagement should not be taken up, the business relationship does not exist and you have no further responsibility under MLR 2007.

 

Corporate clients

 

In the case of entities in the public domain, such as Public Limited Companies, utilities or government departments, risk-based Simplified Due Diligence at a much lower level is required – see CCAB Guidance section 5.  If you are being passed work by a Chartered or Chartered Certified Accountant, or a Solicitor, you may not need to repeat CDD on the client, provided that the Accountant or Solicitor has agreed that you may rely on his CDD (in writing; the responsibility for conducting CDD is yours, and if you rely on another firm for conducting that CDD, you must have clear evidence that it has been properly conducted.)

 

Client identity

 

• Client trading name and business name (if different)?

 

• Registered office address (see also below for proof[1])?

 

• Note the trading address (if different).

 

• Evidence of corporate Identity:

Certificate of Incorporation: Memorandum & Articles of Association if a Limited Company

Evidence of Address: Registered Office (Companies House Form 287)

Directors/Company Secretary:

• Annual Return 363a
• Form 288a
• Evidence of Address
• Evidence of Identity

 

• List of Members: Annual Return 363a

• Who are the ultimate Beneficial Owners of over 25% of the Company, or largest if all own less than 25% and where they are not members of the company?

 

• Client Representative: Name? Have you met the representative face to face?

 

• Purpose of our engagement?

 

• Types & sectors of usual business activities?

 

• What are the client’s main sources of income?

 

• What are the main sources of capital?

 

• (Larger entities only) Have any Audited Accounts been qualified by the auditors?

 

• Has the Company ever been subject to insolvency proceedings, or has it been or it is being dissolved or struck-off?

 

Anti-Money Laundering – Client Due Diligence & Risk Assessment

                               

Individual Clients

Note the original date your firm was appointed, or from which an appointment will take effect.

Client Identity

A note should be made of the source of each piece of information, eg passport, Council Tax notice, utility bill etc. Some of the questions will require a “Yes/No” answer, others a more detailed one.

 

• Client Name?                                                                                    

 

• Home Address?

 

• Trading Address (if different)?

 

• Evidence provided to support Identity:

 

• Evidence of Address and date of birth?

 

• Have you met the Client Face to Face?

 

• Purposes of Engagement (this may usually simply be to provide taxation services or annual accounts)?

 

• Type & Sector of Client’s Business Activities?

 

• Position in business?

 

• If a Partnership – details of Beneficial Owners?

 

• Are the details of Individual’s Capital as declared?

 

• Details of Individual’s Income (if known)?

 

• Is he/she subject to Bankruptcy Proceedings or IVA?

 

• Has the Client ever been disqualified as a Director/Trustee?

 

You now need to complete an initial Due Diligence & Risk Assessment

                                                                                                               

L (Low) - N (Normal) – H (High) Risk (delete two)

 

Details of Any High Risk Assessment:   

 

Where you can do so, indicate why you feel a situation is “unusual”, but if you just have a strong feeling or suspicion, without solid evidence, say so. This is a risk assessment, and the decision to go ahead remains with the Principal/Director/Partner in charge. The prompts below are indicators only.

 

• Was proof of identity/address forthcoming without difficulty (until this is provided, this client MUST not be accepted)?

 

• Are any beneficial owners clearly identified and not unusual in any way? There may be increased difficulty in identifying beneficial owners living outside the UK; bear in mind that if this raises the risk of doing business to unacceptable levels, you always have the right to decline the business.

 

• Are the business/economic purposes of the business in your view “normal”?

 

• Will the firm be involved in handling client cash or assets?

 

• Are there any particular risks which might conceivably arise from the stated or perceived nature of the client’s business?

 

• Are there any obvious risks related to the client arising from his trading relationships?

 

• Does the Business Involve Significant Cash Transactions (describe)? This might be a construction industry business or a car dealership, for instance.

 

• Does the Business involve any special geographical connections (especially cross-border activities)?  You should include reference to any overseas directors, subsidiaries, ownership as well as trading. Clearly identify whether connections are EU or outside the EU – Republic of Ireland is “overseas” but is an EU Member State, while Switzerland is not an EU Member State.

 

• Is the Business Involved with others (other businesses or clients) in any High Risk jurisdictions (such as Iran)? The list of such jurisdictions may be found on HM Treasury’s website at http://www.hm-treasury.gov.uk/fin_crime_policy.htm.

 

• Are there any Politically Exposed Persons associated with the Business (politically-exposed persons are those who have been within the previous year or two in a high civilian or military position in a state outside the EU). You should also include MEPs and MPs in this category?

 

• Are any of the declared sources of funding for the business unusual?

 

• Are any of the client’s sources of income unusual?

 

REMEMBER, YOU ARE UNDER NO OBLIGATION TO TAKE ON A HIGH RISK CLIENT, AND INDEED IF YOU DO SO, AT SOME POINT IN THE FUTURE YOU MAY BE ASKED TO ACCOUNT FOR YOUR DECISION

 

Periodic Due Diligence and revised Risk Assessment following significant changes

Periodic Reviews should be carried out where there have been any significant changes as suggestedin the IFA’s document on Ongoing CDD,  the nature of which should be clearly noted. Detail any economic/legal/business or other reasons for change. Finally, revise the risk assessment where appropriate. The following possible examples give guidance as to the significant changes referred to above:

 

YOU WILL NEED TO RECORD YOUR ANSWERS AND THOUGHTS CAREFULLY, MAKE YOUR ASSESSMENT AND PROCEED OR NOT AS APPROPRIATE. WE SUGGEST YOU FINISH THE ASSESSMENT WITH A CLEAR SIGNED STATEMENT:

 

 (Revised) Risk Assessment:        L (Low)                  N (Normal)  H (High)

(please circle as appropriate)

 

 

Signature and status:                                                                                     Date:

 

 

(AND, if you are not a Principal/Director/Partner/Sole Practitioner)

 

 

Signature of Principal:

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[1] Note: paper-based returns to Companies House may not entirely be relied upon; there have been examples of a company’s identity being “hi-jacked”. Clients should be persuaded if possible to use the PROOF system of sending in web-based returns