Establishing Accounts for Corporate Business Entities

B

The Basel Committee's Customer Due Diligence for Banks paper provides guidelines for banks to follow when establishing an account for a corporate business entity. Let's go through each answer option to understand what the paper suggests:

A. An understanding of the structure of the company: The paper suggests that banks should have an understanding of the structure of the corporate business entity. This means that the bank should gather information about the legal form of the entity, its ownership structure, and the nature of its business activities. By understanding the company's structure, the bank can assess the associated risks and tailor their due diligence measures accordingly.

B. A policy requiring all identified beneficial owners to undergo a national police check: While performing customer due diligence, the paper does not specifically mention a requirement for all identified beneficial owners of the corporate business entity to undergo a national police check. However, it is important to note that conducting background checks on beneficial owners is an essential part of customer due diligence. Banks are expected to identify the beneficial owners of the entity and assess their integrity, reputation, and potential involvement in illicit activities.

C. A process to ensure that the approval of senior management is obtained prior to opening the account: According to the paper, it is suggested that banks should have a process in place to ensure that the approval of senior management is obtained before opening an account for a corporate business entity. This requirement ensures that senior management is involved in the decision-making process and is aware of the risks associated with the entity's account. The involvement of senior management adds an additional layer of scrutiny and accountability.

D. A fee structure that reflects the banks' costs in monitoring the risks associated with the entity's business activities: The paper does not explicitly mention the need for a fee structure that reflects the banks' costs in monitoring the risks associated with the entity's business activities. However, it is generally expected that banks should have appropriate risk-based pricing models that consider the costs associated with conducting due diligence, monitoring the account, and managing the risks associated with the entity's activities. The fee structure should be reasonable and commensurate with the level of risk involved.

In summary, based on the information provided, the Basel Committee's Customer Due Diligence for Banks paper suggests that a bank needs to have in place:

• An understanding of the structure of the company
• A process to ensure that the approval of senior management is obtained prior to opening the account

While conducting background checks on beneficial owners and having an appropriate fee structure are important aspects of effective customer due diligence, they are not specifically mentioned in relation to establishing an account for a corporate business entity in the paper.