In the cases referred to in Articles 18a to 24, as well as in other cases of higher risk that are identified by Member States, Member States must require obliged entities to apply enhanced customer due diligence measures to manage and mitigate those risks appropriately (Article 18(1)).
Articles 18a to 24 deal with respectively: Article 18 (high-risk third countries, and certain types of transactions), Article 19 (cross-border correspondent relationships involving the execution of payments with a third-country respondent institution), Article 20 (transactions or business relationships with politically exposed persons, Article 21 (politically exposed persons and beneficiaries of a life or other investment-related insurance policy) Article 22 (former politically exposed person) Article 23 (family members or persons known to be close associates of politically exposed persons) and Article 24 (shell banks prohibition).
Obliged entities must examine, as far as reasonably possible, the background and purpose of all transactions that fulfil at least one of the following conditions (i) they are complex transactions,(ii) they are unusually large transactions (iii) they are conducted in an unusual pattern and (iv) they do not have an apparent economic or lawful purpose (Article (18(2)).
When assessing the risks of money laundering and terrorist financing, Member States and obliged entities shall take into account at least the factors of potentially higher-risk situations set out in Annex III such as:
Customer risk factors: (c) legal persons or
arrangements that are personal asset-holding vehicles; (d) companies that have
nominee shareholders or shares in bearer form; (e) businesses that are
cash-intensive; (f) the ownership structure of the company appears unusual or
excessively complex given the nature of the company's business; (g) customer is
a third country national who applies for residence rights or citizenship in the
Member State in exchange of capital transfers, purchase of property or
government bonds, or investment in corporate entities in that Member State
Cross border correspondent relationships (Article 19)
With respect to cross-border correspondent relationships involving the execution of payments with a third-country respondent institution, credit institutions and financial institutions must amongst other measures, when entering into a business relationship:
(b) assess the respondent institution's AML/CFT controls;
(d) document the respective responsibilities of each institution;
(e) with respect to payable through accounts, be satisfied that the respondent institution has verified the identity of, and performed ongoing due diligence on, the customers having direct access to accounts of the correspondent institution, and that it is able to provide relevant customer due diligence data to the correspondent institution, upon request (Article 19).
Transactions or business relationships with PEPs (Article 20 and Article 20a)
In relation to transactions or business relationships with politically exposed persons (PEPs), in addition to the CDD measures set out in Article 13 (CDD measures above), Article 20 specifies additional tasks that an obliged entity must undertake.
Listing of prominent public functions by Member States by the Commission and by international accredited organisations (Article 20a)
Each Member State must issue and keep up to date a list indicating the exact functions which qualify as prominent public functions for the purposes of Article 3(9) (PEPs). Member States shall request each international organisation accredited on their territories to issue and keep up to date a list of prominent public functions at that international organisation for the purposes of Article 3(9).
Commission must compile and keep up to date the list of the exact functions
which qualify as prominent public functions at the level of Union institutions
and bodies. That list shall also include any
function which may be entrusted to representatives of third countries and of
international bodies accredited at Union level (Article 20a(2)).
PEPs which are beneficiaries of life or other investment related insurance policies (Article 21)
obliged entities must take reasonable measures to determine whether the beneficiaries of a life or other investment-related insurance policy and/or, where required, the beneficial owner of the beneficiary are politically exposed persons. Those measures shall be taken no later than at the time of the payout or at the time of the assignment, in whole or in part, of the policy. Where there are higher risks identified, in addition to applying the customer due diligence measures laid down in Article 13, Member States shall require obliged entities to:
(a) inform senior management before payout of policy proceeds;
(b) conduct enhanced scrutiny of the entire business relationship with the policyholder (Article 21).
Former PEPS (Article 22)
Where a PEP is no longer entrusted with a prominent public function by a Member State , a third country, or an international organisation, obliged entities shall, for at least 12 months, be required to take into account the continuing risk posed by that person and to apply appropriate and risk-sensitive measures until such time as that person is deemed to pose no further risk.
Extension to family members or close associates of PEPS (Article 23)
The measures referred to in Articles 20 and
21 shall also apply to family members
or close associates of PEPs (Article