4.1. Requirements for Legal Person and Arrangement Customers Under AML-CFT Decision
Effective from 7/6/2021Under Article 8(b) of AML-CFT Decision, when conducting CDD on legal persons and arrangements, LFIs must collect the following information and verify it based on documents from a reliable and independent source:
| • | The name [this may not apply for legal arrangements], Legal Form and Memorandum of Association; | |||
| • | Headquarters’ office address or the principal place of business; in addition, if the legal person or arrangement is a foreign entity, the name and address of its legal representative in the State; | |||
| • | Articles of Association or any similar documents, approved by the relevant authority within the State; | |||
| • | Names of relevant persons holding senior management positions in the legal person or legal arrangement. | |||
Legal persons and arrangements, by definition, cannot take action on their own and must be represented by a natural person. Therefore, for all legal persons and arrangements the LFI must verify that the individual acting on behalf of the customer is authorized to do so, and conduct CDD on that person as required by Article 8(a) of AML-CFT Decision.
In addition to the information described above, under Article 9 of AML-CFT Decision, the LFI must take reasonable measures to identify the beneficial owner(s) of all legal person and legal arrangement customers.
| • | For legal persons, LFIs must at least obtain and verify the identity of all individuals who, individually or jointly, have a controlling ownership interest in the legal person of 25% or more. If no individual can be identified, the LFI must identify the individual(s) holding the senior management position(s) within the legal person customer. | |||
| • | For legal arrangements, LFIs must verify the identity of the settlor and the trustee (or anyone holding equivalent positions for non-trust legal arrangements), the beneficiaries or class of beneficiaries, and any other individuals in control of the legal arrangement. LFIs must also obtain sufficient information on the beneficial owners of a legal arrangement to enable verification of the beneficial owner when paying trust funds to the beneficial owner, or when the beneficial owner begins to exercise his or her legally acquired rights. (This may take place, for example, when a beneficiary of a trust reaches his or her majority and takes full control and ownership of the trust funds.) | |||
As stipulated by Article 10 of AML-CFT Decision, LFIs may omit collecting information from the customer to identify the beneficial owner of a legal person or arrangement customer only in two narrowly defined circumstances, which both apply to legal persons only:
| a) | The customer is a company listed on a regulated stock exchange and subject to disclosure requirements that ensure adequate transparency with regards to the customer’s beneficial owner(s); | |||
| b) | A subsidiary whose majority shares or stocks are held by the shareholders of the holding company. | |||
In both cases, LFIs must still identify the beneficial owner(s) using reliable public sources. LFIs must also verify that the customer does in fact qualify for the exemption. LFIs remain responsible for using a risk-based approach and for ensuring that they understand their customer. LFIs should not seek to take advantage of this exemption if they cannot identify the beneficial owner(s) using reliable public sources. LFIs are unlikely to find reliable public information on the beneficial owners of privately-held holding companies.
In all cases, LFIs are also required by Article 8.4 of AML-CFT Decision to understand the customer’s ownership and control structure.