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6.3.3 CDD Measures Concerning Legal Persons and Arrangements

Effective from 13/7/2023

(AML-CFT Decision Articles 8, 9, 37.1-3)

FIs are obliged to undertake CDD measures concerning legal persons and Legal Arrangements, including identification and verification of the identity of the Beneficial Owners, beneficiaries, and other controlling persons, in accordance with the provisions of the AML-CFT Decision. In fulfilling these requirements, they should take the following guidance into consideration:

•Without prejudice to the provisions of Article 9.1(b) of the AML-CFT Decision, when customers that are legal persons are owned or controlled by other legal persons or Legal Arrangements (for example, when customers are subsidiaries of a parent company or a Trust), FIs should make reasonable efforts to identify and verify the Beneficial Owners by looking through each layer of legal persons or Legal Arrangements (intermediate entities) until the natural persons with owning or controlling interests of 25% or more in aggregate are identified. Furthermore, in the event of multiple legal persons or arrangements with ownership or controlling interests, even where each legal person or Legal Arrangement owns or controls less than 25%, FIs should consider whether there are indications that the entities may be related by common ownership, which could reach or surpass the Beneficial Ownership threshold level of 25% in aggregate.
 
•When undertaking CDD measures on Legal Arrangements which allow funds or other forms of assets to be added or contributed to the arrangement after the initial settlement and by any persons other than the identified settlor(s), FIs should take the necessary steps to ascertain and verify the identity of the Beneficial Owners, and to understand the nature of their relationship with the Legal Arrangement. For customers that are trusts or other legal arrangements, the FI should verify the identity of beneficial owners, being the settlor, the trustee(s), the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust (including through a chain of control/ownership), or equivalent or similar positions for other legal arrangements. For beneficiaries of trusts or other legal arrangements that are designated by characteristics or by class, the FI should obtain sufficient information concerning the beneficiary to satisfy the FI that it will be able to establish the identity of the beneficiary at the time of the payout or when the beneficiary intends to exercise vested rights.
 
•The AML-CFT Decision obliges trustees in Legal Arrangements to maintain basic information relating to intermediaries, who are subject to supervision, and service providers, including consultants, investors or investment advisors, directors, accountants and tax advisors, who have responsibilities in relation to its management. In order to understand the control structure of a customer that is a Legal Arrangement, FIs should obtain this information from the trustees, representatives, or governing or managing officials and including it in the customer’s CDD profile. They should also give the same consideration to other forms of Legal Arrangements and their controlling persons (such as, for example, foundations, membership clubs, religious institutions, or others, along with their founders, representatives and other governing or managing officials).