Q&As

How do you undertake client due diligence (CDD) checks on an individual who is abroad, who you have never met and is not a PEP?

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Published on LexisPSL on 12/11/2020

The following Practice Compliance Q&A provides comprehensive and up to date legal information covering:

  • How do you undertake client due diligence (CDD) checks on an individual who is abroad, who you have never met and is not a PEP?
  • High-risk third countries
  • Non-face-to-face
  • CDD measures

Client due diligence (CDD) requirements underpin the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692, as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, SI 2019/1511 from 10 January 2020 and the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020, SI 2020/991.

Where the MLR 2017 apply, conducting CDD is an absolute requirement. It is not in itself subject to the risk-based approach. Certain components of CDD however, allow for flexibility and positively require risk assessment.

You should determine the risk posed by a client or category of clients as part of your CDD measures and your anti-money laundering (AML) and counter-terrorist financing (CTF) systems and controls generally.

The table in section CDD measures below sets out suggested CDD measures for overseas individuals. You will see it suggests that for an overseas individual you apply regular due diligence, unless you have identified circumstances in your risk assessment of the client that mean enhanced due diligence (EDD) applies. It is essential that you consider the risk here.

High-risk third countries

You must apply EDD measures and enhanced ongoing monitoring to manage and mitigate the risks arising in any business relationship with a person established in a high-risk third country or in relation to any relevant transaction where either of the parties to the transaction is

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