According to the Financial Action Task Force, which action must a financial institution take to fulfill customer due diligence obligations?
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A. B. C. D.C
Sure, I'd be happy to provide a detailed explanation of customer due diligence (CDD) obligations as specified by the Financial Action Task Force (FATF).
The FATF is an intergovernmental organization that sets global standards for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. One of the key recommendations of the FATF is that financial institutions must conduct customer due diligence to identify and verify the identity of their customers and assess the risks associated with their business relationships.
In line with this recommendation, financial institutions are required to take specific actions to fulfill their CDD obligations, which may include the following:
A. Verify the customer is not on any sanction lists. To comply with CDD obligations, financial institutions must verify that their customers are not on any government sanctions lists. This helps to prevent money laundering and terrorist financing by ensuring that the institution is not doing business with individuals or entities that have been designated as high-risk or involved in illicit activities.
B. Identify shareholders listed on the stock exchange of corporate entities holding fifty percent of the shares. Financial institutions must identify the ultimate beneficial owners (UBOs) of their corporate customers, particularly those with complex ownership structures. Identifying UBOs can help to prevent criminals from using shell companies or other opaque structures to launder money or finance terrorist activities.
C. Obtain information on the intended nature of the banking relationship. Financial institutions must obtain information on the intended nature of the business relationship with the customer, including the purpose of the account or transaction, the anticipated frequency and volume of transactions, and the countries involved. This helps to assess the risk associated with the customer and to detect any suspicious activity.
D. Secure a written declaration from the customer confirming the source of the funds. Financial institutions must take steps to verify the source of their customers' funds, particularly for high-risk customers or transactions. One way to do this is to require customers to provide a written declaration confirming the source of their funds, which may include information such as the name and address of the payer, the purpose of the payment, and the nature of the relationship between the payer and the customer.
Overall, financial institutions must take a risk-based approach to CDD, meaning they must assess the level of risk associated with each customer and tailor their due diligence procedures accordingly. The actions specified by the FATF are designed to help financial institutions identify and mitigate the risks associated with money laundering, terrorist financing, and other illicit activities.