- A public servant (a judge of a local court where simple felonies are prosecuted) wants to open a bank account in your bank. What kind of due diligence would you apply to him? Would you consider the judge to be a high-risk client? What kind of information would you ask to the judge? What documentation would you require to the judge?
– In the present case, it is necessary to verify previously the court the judge belongs to, in order to figure out if it is possible to consider him as a high-risk client or not. As laid down by Directive (EU) 2015/849 at article 3, paragraph 9, letter, we should consider as politically exposed person the members of supreme courts, of constitutional courts or of other high-level judicial bodies, the decisions of which are not subject to further appeal, except in exceptional circumstances.
Since the customer was able to provide the documentation proving he is a lower jurisdiction judge, we cannot consider him neither a high-risk client nor a politically exposed person, so that the discipline provided for article 20 about enhanced customer due diligence would not apply to his case, unless expressly provided for in national jurisdiction, as suggested by the above-mentioned article 3, in the part in which it admits exceptional circumstances.
Finally, we would apply to the present case the ordinary discipline provided by article 13, letters a), b), c), d). We would ask him for a proof of his identity, based on his national identification document; a proof of employment status, demonstrating the jurisdiction level of belonging; if necessary, ask for the purpose and intended nature of business relationship; if necessary, ask for the origin of funds.
- As an internal process in your bank, the complete name of every new client should be check in an internal data base of the bank to verify if he or she is mentioned in negative news, or in lists about sanctioned people, most wanted list or terrorism list. While doing this routine work, you find out the judge in the beforementioned case is being accused of receiving bribes. What would you do? Would you accept him as a client? If yes, why? If not, why? What would you tell the judge? We cannot open you a bank account because……? What if the negative news were from five years ago?
– If there is the concrete suspect that the funds are the proceeds of a criminal activity, then we should apply the discipline provided for article 33, letters a) and b), in order to informer the FIU and give them all the necessary information to allow the investigations. According to article 35, we could not accept the judge’s request until the procedure laid down for article 33, letter a) has not been completed. Once the investigation has finalized, if the FIU have proven that the funds are not proceeding from illegal activities, it would be possible to accept the judge’s request.
In the opposite case in which the FIU, as a result of their investigation, figures out that the funds are actually the result of a criminal activity, aimed at money laundering or terrorism financing, we would not accept the judge’s request to open a bank account. According to article 32, paragraph 7, once the FIU had determined the client responsibility, they must transmit the analysis of the investigation to the competent authorities. In this case, we should communicate to the judge the suspension of the process due to additional verifications, considering that article 39, paragraph 1, prohibits the disclosure to the client of the fact that money laundering or terrorism financing analysis is being carried out. So, we may tell the judge that we cannot open a bank account because he has been evaluated as an unwanted client.
Finally, in case the bad news is from five years ago, we should have an information exchange with the obliged person of the previous bank in which the judge had an account, as we can find in article 40, letters a) and b). If we figure out that the judge has been convicted for receiving bribes, then we may not let him open a bank account due to unreliability of the client. If the case was dismissed, or the judge was acquitted at the trial, then we should proceed with the ordinary verification of the funds and decide whether if he currently can open a bank account.
- Imagine that you are a lawyer. A client asks you to help him to transfer 3.500 euros every month during one year, to other persons. In exchange he will gives you a commission. He will give you the 3.500 euros in cash every month, and you will manage to introduce that money in the bank. Are you obliged as a lawyer to perform the customer due diligence of the AML Directives? If yes, which due diligence measures would you perform?
Considering the position of a lawyer, we should distinguish if we are acting in order to participate in a criminal activity with the client, or we have the duty to defend him during a criminal proceeding against him.
The previsions – contained in article 2, paragraph 3, letter b – apply to lawyers in case of:
- buying and selling of real property or business entities;
- managing of client money, securities or other assets;
- opening or management of bank, savings or securities accounts;
- organization of contributions necessary for the creation, operation or management of companies;
- creation, operation or management of trusts, companies, foundations, or similar structures
We can notice that the specific case laid down by number 2 of the present article, links with the considered situation. We can affirm that we would have to perform the customer due diligence provided by AML regulations, more specifically provided in article 13, letters a), b), c), d). Furthermore, article 33, paragraph 1, letter a), provides for a further obligation, since the lawyer has to inform the FIU, where he knows, suspects or has reasonable grounds to suspect that funds, regardless of the amount involved, are the proceeds of criminal activity or are related to terrorist financing.
So, the lawyer should use the information collected during the course of the professional relationship and should have an adequate knowledge of his client, regarding: his activity, his economic capacities, the purposes pursued. Annex III whereas a list of general criteria, such as paragraph 1, letter e): business that are cash-intensive and paragraph 2, letter c): non-face-to-face business relationships or transactions, without certain safeguards, such as electronic signatures. Once the lawyer had discovered the suspicious activity, he would be obliged to a timely reporting to the FIU and would not carry out the transaction, as provided for article 35, paragraph 1. In addition, we have to remember that article 39 expressly prohibits the disclosure of any information to the investigated client.
An exemption from the reporting requirement is established when information is received by a client in connection with judicial proceedings. In addition, any information that is prejudicial or linked to the performance of the defence tasks, and any information received by the lawyer with regard to advice given to the client on the possibility of instituting or avoiding legal proceedings, shall not in any way be reported.
An ulterior exemption from the obligation of reporting is finally expressly previewed when the Lawyer examines the “juridical position” of the customer (articles 14 paragraph 4 and 34 paragraph 2)
- A Syrian student wants to open a bank account in your bank: What documentation would you require to him? What question would you consider are relevant to ask to this client? Is a Syrian citizen a high-risk client?
As reported in the list provided for Delegated Regulation (EU) 2016/1675, we can 2016/1675, we find that Syria is included in the list of high-risk third country, which means that Syria is a country with strategic deficiencies in its national AML/CFT regime that poses significant threats to the financial system of the Union. Having said that, it is possible to affirm that the Syrian student is actually a high-risk client, so we should apply to this case enhanced customer due diligence measures, in order to prevent the risk of money laundering or terrorism financing.
Article 18, chapters 2 and 3, state that Member States shall analyse the background and purpose of all complex and unusually large transactions, and all unusual patterns of transactions, which have no apparent economic or lawful purpose. In particular, obliged entities shall increase the degree and nature of monitoring of the business relationship, in order to determine whether those transactions or activities appear suspicious.
So, we should ask him for a proof of residence or stay permit, Foreigner’s Identification Number allowing for the performance of the legal activity and a proof of employment status (enrolment confirmation by the university or a student card).
- A cryptocurrency trader wants to open a bank account in your bank in Italy. What documents would you require to him to do it? Imagine that the trader explains you his business in detail, and he says that he buys cryptocurrency online and sell them for more money to make profit. He has financial statements; ha pays taxes and has all of this in rule. Do you think his economic activity is risky for AML purposes? Would you open the account to him?
According to Italian regulations in this field, the client should present the following documentation: a copy of an Identity Card and Tax ID and a proof of residence or stay permit. As stated by Italian national Legislative Decree 1993/385 at article 126-novesdecies, paragraph 2, all consumers legally resident in the European Union, without discrimination and irrespective of their place of residence, have the right to the opening of a basic account in the cases and in the manner provided. The payment service provider may refuse the request to open a basic account only in the absence of the requirements laid down in Article 126-noviesdecies or if the consumer already holds a payment account in Italy unless his account will be closed.
Having received all the necessary documentation, there would be no reason to don’t allow the trader to open a bank account. However, we should consider that there is no European regulation about cryptocurrency and it could be an easy way to break the AML Regulations and perform money laundering or terrorism financing. The concrete risk is that cryptocurrency move in a grey zone that encourages the anonymity of the users. Indeed, not every cryptocurrency is able to ensure the certain identity of the user, since wallets are anonymous in most of the cases or there is not a physical check of its owner. However, buying cryptocurrency is not an illegal activity at all and the identity of the user can be proofed when buying by cash at ATMs, since the companies that manage them have the obligation to respect AML Regulations.
In fact, cryptocurrency could involve a potentially high-risk factor, as suggested by Annex III of the AML Regulations, paragraph 2, letter e), that includes as risky factors: new products and new business practices, including new delivery mechanism, and the use of new or developing technologies for both new and pre-existing products; in a way that extend the previsions of article 18 to the present case.
If we consider the possibility to open him a bank account, we would ask for further information about the trader activity by using a risk-based approach, based on: the origin of the funds; any documentation useful to track ongoing transactions and proving their authenticity, the identity of the owner of the wallet and the transaction history, the proof of regular tax payments, the purpose and intended nature of the business relationship.