Due Diligence for Additional Director and Shareholder | Wolfsberg Principles | CAMS Exam Prep
Question
A private banker of a major international bank is onboarding a new private investment company. The banker has verified the identity of the two directors, a husband and wife, who are equal shareholders. The funds in the account will be provided solely by the wife.
The banker was later informed by the company that an additional director and shareholder will be added to the company although the new shareholder will not provide funds.
What is the next step for due diligence in respect to the additional director and shareholder according to the Wolfsberg Anti-Money Laundering Principles for
Private Banking?
Answers
Explanations
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A. B. C. D.B
According to the Wolfsberg Anti-Money Laundering Principles for Private Banking, the next step for due diligence in respect to the additional director and shareholder would be to seek to further understand the relationship between the shareholders and verify the identity of the individual. This may include conducting due diligence in respect to her background and reputation. The correct answer is option D.
The scenario provided states that a private banker is onboarding a new private investment company. Initially, the banker has already verified the identity of the two directors, who are equal shareholders. However, the company later informs the banker that an additional director and shareholder will be added to the company, even though this new shareholder will not provide funds.
In this situation, it is important for the private banker to conduct further due diligence to ensure compliance with anti-money laundering (AML) regulations. The Wolfsberg Anti-Money Laundering Principles for Private Banking provide guidance on conducting effective due diligence.
Option A, which suggests refusing to open the account because it is not usual for an individual to be a director and shareholder without providing funds, is not the appropriate response. While it may be unusual, it does not necessarily indicate wrongdoing or money laundering.
Option B, which suggests seeking to further understand the relationship between the shareholders and conducting due diligence on the source of funds and wealth for each shareholder, is a reasonable step. Understanding the relationship between the shareholders can help identify any potential risks or red flags. Additionally, conducting due diligence on the source of funds and wealth for each shareholder is essential to ensure that the funds being deposited into the account have a legitimate origin.
Option C, which suggests verifying the identity of the additional director and conducting due diligence on her source of funds and wealth, is also a valid consideration. Verifying the identity of the individual is a fundamental step in the due diligence process. Additionally, conducting due diligence on the source of funds and wealth for the new shareholder is necessary to assess the legitimacy of the funds being associated with the account.
However, option D combines the elements of options B and C, making it a more comprehensive approach. Seeking to further understand the relationship between the shareholders and verifying the identity of the individual are both important steps. This may involve conducting due diligence on her background and reputation, in addition to evaluating the source of her funds and wealth.
In summary, the next step for due diligence in this scenario, according to the Wolfsberg Anti-Money Laundering Principles for Private Banking, would be to seek to further understand the relationship between the shareholders and verify the identity of the additional director and shareholder. This would typically involve conducting due diligence on her background, reputation, and the source of her funds and wealth.
