3.2.6. Enhanced Due Diligence Requirements

يسري تنفيذه من تاريخ 1/8/2022

Under Article 15 of AML-CFT Decision, when a customer (or the beneficial owner of a customer) is determined to be a foreign PEP or Related Customer, or where a customer (or the beneficial owner of a customer) is determined to be a domestic PEP or HIO or Related Customer, and when there is a high-risk business relationship accompanying such persons, LFIs must take the following mandatory steps:

•	Obtain senior management approval before establishing a business relationship, or continuing an existing one, with a PEP or Related Customer. The specific senior management member within the LFI who are responsible for approving these relationships will vary based on the LFI’s own unique governance arrangements. The CBUAE expects that, if the approving member represents the business (e.g. the Chief Executive Officer or Chief Operating Officer) as opposed to the compliance function (e.g. the Compliance Officer), the LFI’s policies and procedures will clearly require that the head of the LFI’s compliance function give an opinion as to whether the risk associated with the customer is acceptable. When approving an existing relationship with a PEP or Related Customer, senior management should be notified and their approval obtained for the continuance of the relationship.
•	Take reasonable measures to establish the source of funds, including the source of wealth, of PEPs and Related Customers. This requirement encompasses two distinct concepts:
	o	Source of funds: The direct source of the funds that are used to initially fund the account, and of any funds that are transacted through the account during the course of the business relationship.
	o	Source of wealth: The source of the customer’s overall wealth, whether or not the LFI is exposed to it.
	In the case of foreign PEPs, higher risk domestic PEPs or HIOs, and Related Customers, LFIs should understand, at least at a high level, how the customer acquired his or her wealth. The goal of the process is to provide the LFI with a reasonable degree of confidence that the customer has not generated his or her wealth through illicit activities. Determining source of wealth does not require that the LFI identify and account for every one of the customer’s assets. But the LFI should require the customer to provide information on the customer’s total net worth, and the customer’s principal sources of income (e.g., salary, inheritance, business income, spousal support, etc.). The LFI should supplement information provided by the customer with publicly or privately available information, including, for example media reports, public employee asset declarations (where required by the PEP’s national laws), or published salaries for civil service positions.
	The LFI should then make two determinations:
	o	Whether the customer’s stated net worth is consistent with his or her declared sources of income. For example, if a customer who has spent his career in public service claims not to have inherited any funds yet has a net worth of several million of a currency, this would require further investigation. Alternatively, if a customer was a successful business person for most of his career and only recently entered public service, a high net worth may not be a “red flag”.
	o	Whether the customer’s stated net worth is consistent with the customer’s financial behavior. PEPs who have engaged in illicit activities may lie about their net worth to hide discrepancies with their disclosed sources of income. This is likely to be exposed however when the PEP attempts to engage in financial behavior inconsistent with his or her declared income or net worth. For example, if a PEP declares a total net worth of one million of a currency, this may be consistent with his or her declared licit income; but if he or she chooses to invest a sum equivalent to the entire declared net worth in a speculative investment, this is a sign that his or her wealth requires further investigation.
	Where risks are higher, LFIs should perform more intense due diligence on the customer’s source of wealth. For example, if a PEP declares that a substantial portion of his net worth is derived from ownership of a business, the LFI should collect information to satisfy itself that the business exists, is operational, and can reasonably be expected to generate such funds for the PEP.
•	Conduct enhanced ongoing monitoring of the relationship. LFIs must perform risk-based ongoing monitoring of the business relationship for all customers. In the above mentioned cases, the required enhanced ongoing monitoring could include a number of actions designed to manage the enhanced risk of these customers:
	o	Subjecting the customer file to more frequent review and updating, including a manual review of transactions. All customer files should be reviewed on a risk-based schedule. For the highest-risk PEPs and Related Customers, reviewing the file as frequently as every six or nine months may be appropriate. This review should also include a review of substantial transactions on the account to ensure that they are consistent with information provided by the customer regarding source of funds and source of wealth.
	o	Applying specific risk-based transaction monitoring rules. Where automated transaction monitoring systems allow it, LFIs should apply specific monitoring rules to all PEPs and Related Customers. These rules should have more sensitive thresholds for alerts, and should also be able to flag transactions between PEPs and Related Customers where both customers maintain accounts with the LFI.
	o	Requiring pre-approval for large transactions. It may be appropriate for LFIs to require pre-approval from the compliance function for any transactions representing a substantial portion of the PEP’s declared net worth, taking into consideration the size of the LFI and defined risk appetite.