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16.11 Enhanced Due Diligence (EDD) Process for Legal Entities

N 35/2018 STA
  1. 16.11.1The EDD process, in accordance with Paragraphs 16.11.2 to 16.11.11 of this Chapter, must be applied for a customer at the time of onboarding (i.e. prior to entering into any business relationship), if it is a legal entity. The EDD must include verification of the identity of the legal entity (i.e. its licenses, incorporation documents, etc.) and identification of its ultimate beneficial owners;
  2. 16.11.2The Licensed Person must verify appropriate documents and retain copies to confirm information under Paragraph 16.11.3 of this Chapter. The following process must be followed at a minimum while onboarding a legal entity as a customer:
    1. a)An appropriate KYC Questionnaire of the Licensed Person must be completed and signed by the legal entity;
    2. b)Ownership structure of the legal entity must be collected including the purpose and nature of the intended business relationship;
    3. c)Collect copies of valid permissions/licenses of the entity from competent authorities to carry out the business (examples: certificate of incorporation, trading license or equivalent, license issued by the Central Bank or other competent authorities where applicable, etc.). Certify these copies as “Original Sighted and Verified” by the employee of the Licensed Person who carries out the KYC process after the verification of originals;
    4. d)Licensed Person must carry out a ML/FT risk assessment on business activities of the legal entity by visiting its business location. Also, carry out a risk assessment of its customers;
    5. e)Original identification documents (in accordance with Paragraph 16.8.3 of this Chapter) of Ultimate Beneficial Owners (UBO) must be verified and retain the copies after certification by the employee of the Licensed Person as “Original Sighted and Verified”;
    6. f)Collect the list of authorized signatories and verify their original identification documents (copies to be certified as “Original Sighted and Verified” and must retain in the records);
    7. g)Assess and record the expected annual activity (annual value and number of transactions for future transaction monitoring);
    8. h)Authorization letter must be taken for representatives of the legal entity who carry out transactions on its behalf;
    9. i)Verify original identification documents of representatives, who have authorization to carry out transactions, in accordance with Paragraphs 16.8.3 and 16.9.6 of this Chapter (copies to be certified as “Original Sighted and Verified” and must retain in the records). Such representatives must be UAE residents. The relationship of such representative with the legal entity must be established;
    10. j)Apply sanction checks and internet searches on the name of the legal entity, Ultimate Beneficial Owners, group companies, subsidiaries and the names of representatives of the legal entity who are authorized to carry out transactions on its behalf;
    11. k)Apply FPEP checks on Ultimate Beneficial Owners and where the Ultimate Beneficial Owner is a FPEP, the Licensed Person must collect the information about the source of wealth of such UBO; and
    12. l)Both the Manager in Charge and the Compliance Officer must approve the business relationship with legal entities. Where an Ultimate Beneficial Owner is FPEP, the business relationship with such legal entity must be established only after obtaining approval of the Board of Directors (or of the Owner/Partners where there is no Board of Directors).
  3. 16.11.3The following information about the customer, which is a legal entity, must be recorded in the Point of Sale system, at a minimum, to create the customer profile and the “Unique Identification Number” (UIN) after completing the Enhanced Due Diligence process under Paragraphs 16.11.1 and 16.11.2 of this Chapter:
    1. a)Full legal name of the entity;
    2. b)Residential status (whether incorporated/operating within the UAE or outside the UAE);
    3. c)Address (P.O Box, Shop No., Building name, Street, City, Emirate, Country);
    4. d)Phone numbers;
    5. e)Fax number;
    6. f)Email;
    7. g)Date of establishment;
    8. h)ID type (whether trade license or the equivalent);
    9. i)Trade license (or the equivalent) number;
    10. j)Trade license (or the equivalent) place of issue;
    11. k)Trade license (or the equivalent) issue date;
    12. l)Trade license (or the equivalent) expiry date;
    13. m)Type of business of the entity;
    14. n)Names and ID details, such as ID types and ID numbers, of Ultimate Beneficial Owners of the entity;
    15. o)Names and ID details, such as ID types and ID numbers, of persons authorized to carry out transaction on behalf of the entity; and
    16. p)Expected annual activity (i.e. expected annual value and number of transactions for future transaction monitoring).
  4. 16.11.4The Licensed Person must collect appropriate documents to verify and confirm the source of funds, purpose of transaction and the commercial/economic reason for each transaction by legal entities;
  5. 16.11.5The following customer information must be printed on the transaction receipt, at a minimum:
    1. a)Unique Identification Number assigned to the entity (UIN);
    2. b)Full legal name of the entity;
    3. c)Address (P.O Box, Shop No., Building name, Street, City, Emirate, Country);
    4. d)Phone number;
    5. e)Name and ID number of the person representing the legal entity to carry out transactions on its behalf;
    6. f)Country of incorporation;
    7. g)ID type (whether trade license or the equivalent);
    8. h)Trade license (or the equivalent) number;
    9. i)Trade license (or the equivalent) place of issue;
    10. j)Trade license (or the equivalent) issue date;
    11. k)Trade license (or the equivalent) expiry date;
    12. l)Method of payment (whether cash or cheque, etc.);
    13. m)Source of funds;
    14. n)Purpose of transaction; and
    15. o)Beneficiary name and bank account details (wherever applicable).
  6. 16.11.6The receipt must be signed by the representative of the legal entity who carries out the transaction on its behalf and must be retained in the records along with all KYC supporting documents in accordance with Paragraph 16.24 of this Chapter;
  7. 16.11.7The Enhanced Due Diligence must be repeated and the customer profile, including the supporting evidence as per Paragraph 16.11.2 of this Chapter, must be updated annually at a minimum. The Licensed Person must ensure that copies of valid licenses are available in the records at all times. The Enhanced Due Diligence must also be repeated whenever there is a change in the profile of the customer, such as any change in the ownership of an entity;
  8. 16.11.8The Enhanced Due Diligence in accordance with Paragraph 16.11.2 of this Chapter must also be undertaken before entering into below types of business relationships:
    1. a)Foreign correspondent banking arrangements, such as those with banks, exchange houses or any other financial institutions, for the purpose of money transfer services;
    2. b)Money transfer arrangements with instant money transfer service providers;
    3. c)Hedging arrangements with local or foreign institutions;
    4. d)Arrangements to import or export banknotes from/to foreign institutions, such as Banks, exchange houses or other financial institutions outside the UAE; and
    5. e)Arrangements with local or foreign entities to offer special products/services.
  9. 16.11.9All business relationships under Paragraph 16.11.8 of this Chapter must be approved by the Compliance Committee of the Licensed Person;
  10. 16.11.10While undertaking Enhanced Due Diligence as per Paragraph 16.11.8 of this Chapter on entities located outside the UAE, the Licensed Person may:
    1. a)visit the business locations of entities which are located in high risk countries in order to carry out risk assessment as per Paragraph 16.11.2 (d) of this Chapter (i.e. no site visit is required when such entities are located in low or medium risk countries);
    2. b)apply 20% (instead of 5% as per the definition under Appendix 1) in order to identify the Ultimate Beneficial Owners provided that it is a regulated banking institution and 10% (instead of 5% as per the definition under Appendix 1) in all other cases; and
    3. c)collect copies of the identification documents of Ultimate Beneficial Owners on a risk sensitive basis which are certified as “Original Sighted and Verified” by the Compliance Officer of such foreign entities, in case the verification of original documents by the Licensed Person is practically impossible.
  11. 16.11.11The Licensed Person must not enter into any business relationship with a Shell Company or a Shell Bank.