3.3.4. Enhanced Due Diligence for Higher-Risk Scenarios

يسري تنفيذه من تاريخ 31/10/2022

The AML-CFT Law and the AML-CFT Decision impose specific and enhanced due diligence obligations on insurance operators with respect to two classes of customers or transactions:

	•	Customers that are politically exposed persons (“PEPs”), which include the direct family members or associates known to be close to the PEPs; and
	•	Business relationships and transactions with natural persons, legal persons, or legal arrangements from high-risk countries.

The AML-CFT Law and Decision give special attention to customers in these groups because they are likely to expose operators to a heightened risk of money laundering, terrorism financing, and other illicit finance.

In addition to these classes of customers and transactions, for which EDD is mandatory, operators are expected to implement appropriate policies and procedures to determine whether relationships with or transactions undertaken for or on behalf of a customer present a higher risk for ML or FT. Examples of potentially higher-risk scenarios include, but are not limited to, those in which:

	•	The customer belongs to a higher-risk industry or sector identified in topical risk assessments, or to an industry or sector identified by the operator as higher-risk for ML or FT;
	•	The ownership structure of a legal entity customer appears unusual or excessively complex given the nature of the legal entity’s business;
	•	The legal entity customer is a personal asset-holding vehicle;
	•	The business relationship is conducted under unusual circumstances, such as significant unexplained geographic distance between the operator and the customer;
	•	The legal entity customer has nominee shareholders or shares in bearer form;
	•	The customer is a cash-intensive business;
	•	The customer operates in or does business with a jurisdiction that has relatively higher levels of corruption or organized crime, or inadequate AML/CFT measures, as identified by the FATF;
	•	The customer operates in or does business with a jurisdiction identified by credible bodies (e.g., reputable international bodies such as Transparency International) as having significant levels of corruption, terrorism financing, or other criminal activity;
	•	The relationship involves or could involve cash or anonymous transactions;
	•	The relationship involves or could involve frequent payments received from unknown or unassociated third parties.

Additional examples of higher-risk attributes and red flag indicators for the insurance sector are provided in section 2.2 and Annex 1 of this Guidance respectively.

As per Article 4.2 b) of the AML-CF Decision, where the operator identifies a customer or relationship as presenting higher ML/FT risks, it must apply EDD measures commensurate with those risks. Examples of EDD measures include but are not limited to:

•	Obtaining approval from the operator’s senior management to establish or continue a business relationship with the customer, including making any payment to a beneficiary or payee;
•	Establishing the source of wealth and source of funds of the customer and any beneficial owner of the customer;
•	Conducting enhanced monitoring during the course of the business relationship with the customer, including by increasing the degree and nature of transaction monitoring and CDD updating;
•	Requiring the first payment to be carried out through an account in the customer’s name with a bank subject to similar or equivalent CDD standards;
•	Using public sources of information (e.g., websites) to gain a better understanding of the reputation of the customer or any beneficial owner of the customer;
•	Commissioning external intelligence reports where it is not possible for the operator to easily obtain information through public sources or where there are doubts about the reliability of public information; and
•	For high-net-worth individuals, particularly those utilizing higher-risk products or services or characterized by other markers of heightened ML/FT risk:
		○	Independently corroborating information obtained on the source of wealth of customers and beneficial owners against documentary evidence or public information sources;
		○	Screening operating companies and individual benefactors contributing to the customer’s and beneficial owner’s wealth or funds; and
		○	Scrutinizing transactions relating to customers that have multiple policies with the operator or to customers having a common beneficial owner.

In addition, as noted in section 3.3.1.2 above, if the insurance operator has followed its standard beneficial ownership identification and verification procedures and is still not confident that it has identified the individuals who truly own or control the customer, or when other high-risk factors are present, the operator should consider intensifying its efforts to identify the beneficial owners. The most common method of doing so is to identify additional beneficial owners below the 25 percent ownership threshold mandated by UAE law. This may involve identifying and verifying the identity of beneficial owners at the 10 percent or even the 5 percent level, as risk warrants. It may also involve requiring the customer to provide the names of all individuals who own or control any share in the customer—without requiring them to undergo CDD—in order to conduct sanctions screening or negative news checks.

Additional examples of EDD measures are provided in the CBUAE’s AML/CFT Guidelines for Financial Institutions, section 6.4.