The banks at the time of starting a relationship with a client, whether it is for the opening of accounts or another transaction, currently require information in order to confirm that the person or entity that is requesting financial services exists and where the funds come from, among others.
In times when the applicants are legal persons whose partners or shareholders are natural persons or companies (in both cases, whether national or foreign), they are also required to provide the requested information. In the particular case of legal entities, banks are requesting the information of those shareholders or partners who possess more than 10% of the value of common stock or of participation and so on until they get to the natural person.
When a bank or financial institution asks for such requirements, in many cases the clients wonder about the power of the Bank in order to make such a request. These requirements are part of the security check up in the Standard for the management of prevention of the risks of money laundering, goods or assets; and financing terrorism (AML/FT) (The norm for gestation of prevention of the risks of money washing, goods or assets ;and the financing of terrorism, ), here and after “the Norm” (Resolution: CD-SIBOIF5-2008- 524-1-SEA dated 05 March 2008 and resolution: CD-SIBOIF11-2009-576-1-SEA dated 11 March 2009, which you can find the consolidated text at https://www.unodc.org/tldb/pdf/Nicaragua/NIL_AML_2009.pdf ), and which has as its object the establishment of requirements, guidelines and minimum basic aspects that the supervised entities that make up the System Nicaraguan financial, must adopt, implement, update and improve, on their own initiative and responsibility, commensurate with the nature of the industry and market in which each of them operates and according to the level of risk of their respective structures, customers, business, products, services, distribution channels and jurisdictions in which it operates; to manage, prevent and mitigate the risk of being used, consciously or unconsciously, locally or cross-border, to launder money, goods or assets; and for financing terrorism (cap. 2 of the norm).
In accordance with article 8 of the norm, the supervised entity (in this case the bank), on the basis of their specificity and risk profile within the industry in which it operates, must implement its own procedures, measures and adequate internal controls to continuously develop, a policy of “Due Diligence to the knowledge of the client” (DDC) in accordance with the minimum requirements set out in the norm.
According to the norm there are two types of DDC, the due diligence standard for customers with medium-risk level or normal and Enhanced Due Diligence for clients with a high level of risk.
In the DDC, in the case of clients who are legal persons the bank must, obtain up-to-date documentation and evidence on its legal constitution and registration in the due to register accordingly to the activity they dedicate themselves to, your address, the names of their owners or majority or significant partners, directors, trustees (where applicable) or other persons exercising control over the client; as well as the identification of the persons authorized to represent, sign or act by the customer, or link him with the supervised entity, which must understand the ownership and control structure of the customer. Depending on the nature of these documents, it must be reviewed by the respective legal area of the Bank, documents which are issued abroad and/or foreign language must be duly translated into Spanish and be authenticated by the competent authorities in accordance with the laws and conventions of the matter (article 9(c) and (m).
Also, in the Due Diligence to the knowledge of the Standard Client, it must be required (among others) the legal structure of the client and his background (article 14, paragraph B, subparagraph (i).
For reference, the DDC intensified, is a reinforced, enhanced, expanded, and is the set of policies, procedures and internal control measures reasonably more stringent, deep, comprehensive and demanding that in this case the Bank must design and implement to clients classified as high-risk, based on the analysis of the factors of risk of Money Laundering and Terrorist Financing and/or in accordance with the results of the array of rating the level of risk of money laundering and financing of terrorism. The risk factors are all those circumstances and characteristics of the client and operations that generate a higher probability of risk of Money Laundering and Financing of Terrorism that merit special attention and a DDC intensified (cap. 15 of the norm).
According to the norm, in addition to the enumeration that indicates how people (whether natural or legal persons) considered as high-risk, also the Bank itself can identify a customer as worthy of special attention on the basis of their experience with these, for the transaction history monitored from these, due to the presence of high indicators of public corruption, among others (article 15(B)(I sub paragraph IV(g). Therefore, based on the above, it is inferred that the Bank has the power to perform the intensified DDC when it deems it appropriate.
From the above, we find that among other measures to be applied by the Bank in the intensified DDC, there are: “j) To Know, reasonably, who are the majority owners and partners or significant that integrate a legal person which at the same time is a partner of the legal person client of the entity, as well as the true beneficiaries and/or owners of the funds managed; and particularly in the case of commercial companies should also identify to: i.- Persons who exercise real control over its operations, assets, properties and business in general. ii.- the main partners, shareholders/signatories or authorized signatories, or other persons exercising significant control over society. iii.- Partners and other persons exercising control owner in the case of Partnerships and Limited Partnerships. iv.- Persons controllers, when other societies or trusts have control over the company.”
So as you can see according to the cited norm, banks according to the same, have the power to request information it deems appropriate in order to comply with its obligation to “know your customer” in order to prevent the laundering of money and other wrongful acts.
Please contact Fabiola Urbina furbina@alvaradoyasociados.com.ni for additional information.