No relaxation during “Bed rest”

Under the current global circumstances, pretty much all business areas face difficulties, including financial institutions and corporate administrators. All current and potential clients are important for any company, but especially in any unstable economic conditions. Currently, most companies around the world are trying to work remotely as if they were in the office and attract new clients, but not all procedures for the reception of clients provided for by the laws and regulations on anti-money laundering and counter-terrorism financing may be physically observed. For example, it is impossible to hold personal meetings with clients when locked-down, and therefore it is impossible to review identification or any other documents submitted by the client in the original in their presence.

It is notorious that in any unstable economic conditions, fraudsters always become more active, and therefore, both clients and companies have to stay alert. Financial institutions and corporate administrators have to be particularly careful when accepting new clients and always remember about an option of applying Enhanced Due Diligence (EDD) procedures, such as:

  • For clients with whom holding a personal meeting is impossible (non face-to-face): video calls with an option of recording a conversation, as well as saving a video image of the client and documents that will further be sent by the client as copies or originals (subject to the laws on personal data protection);
  • For politically exposed persons: request for additional confirmation of the source and amount of income (form 2-НДФЛ (personal income tax), bank account statement, gift agreement, inheritance documents, etc.), additional verification in specialized information databases, request for certificates of absence of criminal records and other documents and information that will be necessary.
  • For clients associated with activities that pose an increased risk of money laundering and terrorist financing (oil and gas industry, art sale, etc.): request for all agreements that indicate the company’s activities (sale and purchase agreements, supply agreements, loan agreements, assignment agreements, etc.), request for financial statements of counterparties, subsidiaries and parent companies, additional verification of counterparties in specialized information databases, and other documents and information that will be necessary.
  • For clients that fall under any risk categories: enhanced verification of transactions, verification of the reason for conducting transactions prior to their execution, potential refusal to conduct a transaction before all the required supporting documents (agreements, statutory documents of counterparties, identification documents of directors, etc.) are provided, complete refusal to conduct a transaction with notification of the relevant state authorities when an attempt to commit an illegal operation is suspected.

It should be noted that the listed measures are not exhaustive and, despite the fact that the regulation on anti-money laundering and counter-terrorism financing is similar all over the world, each jurisdiction is entitled to introduce its own additional measures. The scope of such measures is always determined by the anti-money laundering and counter-terrorism financing officer on site, depending on the situation and their professional experience. It should also be noted that financial institutions, such as banks, investment and insurance companies, may currently impose the strictest policies with their clients, but one should take into account that these organizations are most often exposed to the risk of money laundering and terrorist financing and have to act both in their own interests and in the interests of their clients.

Irina Otrokhova

Chief Compliance Officer

Corporate Services

Korpus Prava (Cyprus)

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