LESSON 9: ENHANCED MEASURES

Obliged entities must apply, in accordance with the normal due diligence measures (see Lesson 6), enhanced due diligence measures when the client or operation presents a high risk of money laundering or terrorist financing.

LEGAL ASSUMPTIONS OF APPLICATION OF ENHANCED DILIGENCE MEASURES

The Law and the regulations establish certain scenarios in which the client is always considered a client with higher-than-average risk, such as:

1. Natural or legal persons who are non-residents in member countries of the European Union or equivalent third countries.

2. Natural or legal persons with nationality, domicile, or tax residence in countries, territories, or jurisdictions considered at risk, including those countries for which the Financial Action Task Force (FATF) or the European Union require the application of enhanced due diligence measures.

3. Politically exposed persons (PEPs). (see Lesson 12).

4. Offshore companies.

5. Companies that just hold assets.

6. Companies whose shareholding and control structure is complex, making it difficult to identify the beneficial owner within a reasonable time.

7. Companies represented by bearer shares where the ownership or control structure has been determined.

8. Natural or legal persons acting through intermediaries that are not subject to adequate supervision.

9. Shelf companies, when there is a transfer of shares or participations prior to the beginning of the business relationship.

Likewise, natural or legal persons who carry out any of the following activities will be considered high-risk clients:

• Private banking services.
• Operation of casinos, gambling machines, betting, or other gambling games.
• Currency exchange and/or transfer management.
• Trade in precious metals, jewelry, art, etc.
• Recycling of metals and scrap.
• Manufacture and/or distribution of weapons.
• Customers who habitually use wholesale means of payment.
• Charities and other non-profit organizations that operate internationally and are not subject to controls and supervision by public authorities and/or self-regulatory entities

Finally, the regulations establish a series of operations that must also be considered high risk or above-average risk. These operations are:

• When the business relationship or operation involves a transfer of funds from or to countries, territories, or jurisdictions considered risky.
• Foreign currency exchange operations whose amount, either singular or accumulated per calendar quarter, exceeds 6,000 euros.
• Natural or legal persons for whom there is a lack of correspondence between the amount of the transaction and their known income.
• Unusual operations or business relationships or those carried out through intermediaries.
• Any other natural or legal persons that, when analyzing their risk profile, present characteristics, due to their nature, type of activity, origin of the funds, or other relevant circumstances, which should be considered to have a higher-than-average risk, as decided by the Internal Control Unit (ICU).

TYPES OF ENHANCED MEASURES‎

When dealing with a customer or a transaction whose risk is higher than average, obliged entities must:

1. Verify, by means of reliable documents, the real ownership of the customer.
2. Obtain, by means of additional information, greater knowledge of the customer, especially regarding their declared professional or business activity.
3. Obtain, by means of additional documentation or information, the origin of the customer’s funds and/or assets.
4. Examine and document the consistency of the business relationship and the economic rationale of the transaction with the documentation and information available on the customer.
5. Obtain management authorization to establish or maintain business relationships.
6. Require payments or receipts to be made into an account in the customer’s name, opened with a credit institution domiciled in the EU or equivalent third countries

Obliged entities must also carry out enhanced monitoring of these customers and transactions, increasing the number and frequency of controls applied and selecting patterns of transactions for examination.

REMEMBER

Just because a customer is considered above average risk does not mean that you cannot trade with them. You simply need to take a number of additional steps to check more carefully that there is no risk in either the customer or the transaction.