6.2 Circumstances and Timing for Undertaking CDD Measures
(AML-CFT Decision Article 5.1)
Under normal circumstances, FIs are obliged to undertake CDD measures (including verifying the identity of customers, Beneficial Owners, beneficiaries, and controlling persons) either prior to or during the establishment of a Business Relationship or the opening of an account, or prior to the execution of a transaction for a customer with whom there is no Business Relationship. Guidance in regard to these requirements and certain exceptional circumstances provided for in the AML-CFT Decision is provided in the sub-sections below.
6.2.1 Establishment of a Business Relationship
FIs establish a Business Relationship with a customer when they perform any act for, on behalf of, or at the direction or request of the customer, with the anticipation that it will be of an ongoing or recurring nature, whether permanent or temporary. Such acts may include, but are not limited to:
• Assigning an account number or opening an account in the customer’s name;
• Effecting any transaction in the customer’s name or on their behalf, or at the customer’s direction or request for the benefit of someone else;
• Providing any form of tangible or intangible product or service (including but not limited to granting credits, guarantees, or other forms of value) to or on behalf of the customer, or at the customer’s direction or request for the benefit of someone else;
• Signing any form of contract, agreement, letter of intent, memorandum of understanding, or other document with the customer in relation to the performance of a transaction or series of transactions, or to the provision of any form of tangible or intangible product or service as described above;
• Accepting any form of compensation or remuneration (including a promise of future payment) for the provision of tangible or intangible products or services, as described above, from or on behalf of the customer;
• Receiving funds or proceeds of any kind (including those held on a fiduciary basis, for safekeeping, or in escrow) from or on behalf of the customer, whether for their account or for the benefit of someone else;
• Any other act performed by FIs in the course of conducting their ordinary business, when done on behalf of, or at the request or direction of, a customer.
In such cases, and other than in the exceptional circumstances described below (see Section 6.2.3, Exceptional Circumstances), FIs are required to undertake appropriate risk-based CDD measures (see Section 6.3, Customer Due Diligence (CDD) Measures, Section 6.4, Enhanced Due Diligence (EDD) Measures, and Section 6.5, Simplified Due Diligence (SDD) Measures for further guidance).
In addition, CDD also needs to be conducted when
• there is a ML/FT suspicion (see Section 7.2, Identification of Suspicious Transactions);
• there are doubts about the veracity or adequacy of identification data previously obtained with regard to the customer.
Among other things, the CDD measures should include verifying the identity of the customer as well as the Beneficial Owners, beneficiaries, and controlling persons, and understanding the nature of their business and the purpose of the Business Relationship.
6.2.2 Occasional Transactions
During the course of business, FIs may be called upon to perform occasional or non-recurring transactions for customers with whom there is no ongoing account or Business Relationship. Examples of such transactions include, but are not limited to:
• Exchange of currencies;
• Issue or cashing/redemption of traveler’s cheques;
• Transfer of money or other value for a walk-in customer;
On such occasions, and other than in the exceptional circumstances described below (see Section 6.2.3, Exceptional Circumstances), FIs are required to identify the customer and verify the customer’s identity as well as that of the Beneficial Owners, beneficiaries, and controlling persons. Furthermore, FIs are required to undertake appropriate risk-based CDD measures (see Section 6.3, Customer Due Diligence (CDD) Measures, Section 6.4, Enhanced Due Diligence (EDD) Measures, and Section 6.5, Simplified Due Diligence (SDD) Measures for further guidance), including among other things understanding the nature of the customer’s business and the purpose of the transaction, in the cases specified in Article 6 of the AML-CFT Decision, as follows:
• When carrying out occasional transactions in favour of a Customer for amounts equal to or exceeding AED 55,000 (or equivalent in any other currency), whether the transaction is carried out in a single transaction or in several transactions that appear to be linked;
• When carrying out occasional transactions in the form of Wire Transfers for amounts equal to or exceeding AED 3,500 (or equivalent in any other currency) (see Section 6.3.2, CDD Requirements Concerning Wire Transfers);
• When there is a ML/FT suspicion (see Section 7.2, Identification of Suspicious Transactions);
• When there are doubts about the veracity or adequacy of identification data previously obtained with regard to the customer.
Some of the indicators of transactions that may appear to be linked include, but are not limited to the following:
- Multiple transactions with the same or similar customer reference codes; - Transactions executed sequentially or in close time proximity, and involving the same or related counterparties; - Multiple transactions attempted by a customer with whom there is no Business Relationship at different branches of the same FI on the same day.
6.2.3 Exceptional Circumstances
(AML-CFT Decision Articles 4.3, 5.1(a)-(c), 10, 11.1(b), 13.2)
From time to time, certain situations may arise which fall outside of the normal course of CDD processes. Under these circumstances, described below, FIs are permitted to handle the timing, customer identification, and other aspects of customer due diligence procedures exceptionally. Specifically:
• When there is no ML/FT suspicion, and the ML/FT risks are identified as low, FIs may complete the verification of the customer’s identity after establishing the Business Relationship under the conditions specified in the relevant provisions of the AML-CFT Decision. In such circumstances, the verification of the identity must be conducted in a timely fashion, and FIs must ensure that they implement appropriate and effective measures to manage and mitigate the risks of crime and of the customer benefiting from the Business Relationship prior to the completion of the verification process. Examples of such measures which FIs may consider taking in this regard are, among others:
- Holding funds in suspense or in escrow until the verification of the identity is completed; - Making the completion of the verification of the identity a condition precedent to the closing of a transaction.
• In the case of Legal Arrangements, such as Trusts or foundations, or of life insurance policies (including funds-generating transactions, such as life insurance products relating to investments and family Takaful insurance) in which there are beneficiaries who are not named, but instead belong to a designated class of future or contingent beneficiaries, FIs are required to obtain sufficient information about the details of the class of beneficiaries so as to be in a position to establish the identity of each beneficiary at the time of the settlement, pay-out, or exercise of their legally acquired rights. Furthermore, FIs must verify the identity of the beneficiaries at the time of settlement or pay-out and prior to the exercise of any related legally acquired rights. They should also ensure that they implement appropriate and effective measures to manage and mitigate the risks of crime and of the customer benefiting from the Business Relationship prior to the completion of the verification process. Examples of such measures which FIs may consider taking in this regard are, among others:
- Holding funds in suspense or in escrow until the verification of the identity is completed; - Making the completion of the verification of the identity a condition precedent to the closing of a transaction.
• When a legal entity customer or its controlling stakeholder meets the conditions specified in Article 10.1-2 of the AML-CFT Decision with regard to publicly listed companies (including the condition that information concerning the identity of the shareholders, partners, or Beneficial Owners with an interest of 25% or more is available from reliable sources), FIs are exempted from taking the normally required identity verification measures. In this regard, FIs should ensure that the disclosure and transparency requirements of the regulated stock exchange are at least equivalent to those of the State, and should document the evidence they obtain concerning the relevant disclosure and transparency requirements.
It is important to note that, while FIs are exempted in such situations from identifying and verifying the identity of the shareholders, partners or Beneficial Owners (or in the event that no such person can be identified, of the relevant senior management officers), they are not exempted from ascertaining the identity of senior management.
Examples of reliable information sources in this regard include, but are not limited to:
- Stock exchange disclosure reports or websites; - Corporate annual reports, websites, or other forms of official public disclosure; - Official or public registries; - Credit reporting agencies; - Recognized, well-established media outlets.
• When FIs suspect that a customer or Beneficial Owner is involved in the commitment of a crime related to money laundering, the financing of terrorism, or the financing of illegal organisations, and they have reasonable grounds to believe that undertaking customer due diligence measures would tip off the customer, then they should not apply CDD measures, but should instead report their suspicion to the FIU along with the reasons that prevented them from carrying out the CDD measures.