Circular on. of Identity for Credit Institutions

Transcription

1 Circular on Identification and Verification of Identity for Credit Institutions

2 Table of contents 1. Introduction Purpose of identification obligations Explanation of terms Identification Information on identity Natural persons Legal persons Meaningful supporting documents Natural persons Legal persons Parties addressed by identification obligations Supervised companies Third parties Identification procedures Obtaining information on identity Verifying the information on identity obtained Verifying the authenticity of proof of identity Persons whose identity must be ascertained and verified Customers (Article 40 para. 1 BWG) Definition Scope of identification obligations Special case of minor customers Special case of trustees (Article 40 para. 2 BWG) Definition Scope of identification obligations Trustors (Article 40 para 2 BWG) Definition Scope of identification obligations Beneficial owners (Article 40 para. 2a no. 1 BWG) General comments on the term Beneficial owners of companies Beneficial owners of legal entities which administer or distribute funds Scope of obligation to identify the beneficial owner Authorised representatives Definition Scope of identification obligations Cases in which identification obligations apply when must identification take place? Establishment of a permanent business relationship (Article 40 para. 1 no. 1 BWG)

3 7.2. Execution of individual transactions exceeding the limit amount (Article 40 para. 1 no. 2 BWG) Suspicion of money laundering or terrorist financing activity (Article 40 para. 1 no. 3 BWG) Deposits into or withdrawals from savings accounts that exceed the limit amount (Article 40 para. 1 no. 4 BWG) Questions of doubt regarding the identity data obtained (Article 40 para. 1 no. 5 BWG) Consequences in cases where identification is impossible Identification obligations in individual banking transactions Savings account transactions Securities transactions Non-face to face transactions School savings schemes Severance and retirement fund transactions Updates of information Obligation to keep records

4 1. Introduction 1. The international community has set the goal of preventing the use of the financial system for the purpose of money laundering and terrorist financing. Cooperation on the part of credit and financial institutions is required in order to reach this goal. Their role is to counteract the flow of funds which stem from criminal activity or are destined for terrorist purposes by complying with certain customer due diligence requirements. 2. In connection with combating money laundering and terrorist financing, the major customer due diligence requirements applying to credit and financial institutions include: identification and verification of the identity of customers, authorised representatives and beneficiaries (trustors and beneficial owners); obtaining information on the purpose and intended nature of the business relationship; conducting ongoing monitoring of the business relationship; and reporting cases of suspicion. The aim in requiring credit institutions to introduce appropriate strategies and procedures for complying with customer due diligence requirements is to ensure that the individual measures taken by credit institutions will as a whole result in an effective system for combating money laundering and terrorist financing. 3. This FMA Circular is intended to assist credit and financial institutions in complying with requirements for ascertaining and verifying the identity of customers, authorised representatives and beneficiaries. 4. This Circular is directed at all Austrian credit institutions as well as credit institutions from EEA Member States, inasmuch as these are active in Austria either through branches under the freedom of establishment or directly provide services under the freedom to provide services. This Circular is furthermore directed at all Austrian investment firms and investment service providers as well as investment firms from EEA Member States, inasmuch as these are active in Austria either through branches under the freedom of establishment or directly provide services under the freedom to provide services. This Circular is also directed at all Austrian payment institutions as well as payment institutions from EEA Member States, inasmuch as these are active in Austria either through branches under the freedom of establishment or directly provide services under the freedom to provide services. It similarly applies to e-money institutions. 4

5 The parties addressed by this Circular are referred to uniformly in the following as supervised companies. 5. Financial institutions pursuant to Article 1 para. 2 of the Bankwesengesetz (BWG; Banking Act) are equally subject to the due diligence obligations specified in the BWG for the purpose of combating money laundering and terrorist financing. The contents of this Circular may thus also provide financial institutions with assistance in applying the specific statutory provisions. 6. The legal basis for ascertaining and verifying identity are found in particular in Article 40 paras. 1, 2 and 2a no. 1 and Articles 40a and 40b BWG. The aforementioned provisions transpose into national law Directive 2005/60/EC of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing ( Third Money Laundering Directive ), which in turn is based on the 40 Recommendations and 9 Special Recommendations by the FATF (Financial Action Task Force on Money Laundering). 7. As well as setting out the relevant legal foundations, this Circular also includes key practical considerations and aspects of international standards. In developing these requirements, due consideration has been given to the heterogeneous structure of Austria s banking industry. 8. It is the responsibility of the individual supervised companies to more specifically define these requirements in accordance with the type, size, business structure and risk potential of the company in the particular case. As a consequence of the legal requirements for diligence on the part of management, it may well be appropriate to define more stringent recommendations than those presented below. 9. This Circular reflects the FMA s legal opinion on the statutory due diligence obligations for the purpose of combating money laundering and terrorist financing. The legal basis is not affected thereby. No rights or obligations going beyond those defined in statutory provisions may be deduced from this Circular. 5

6 2. Purpose of identification obligations 10. In order to be able to prevent and hinder money laundering and terrorist financing and aid in the prosecution of these offences, supervised companies must have as much knowledge as possible about their customers as well as their customers activities. The most important principle in combating money laundering and terrorist financing is therefore that of knowing your customer. By complying with identification obligations, supervised companies ensure that they have sufficient information about the identity of their customers. This in turn is a prerequisite for performing a comprehensive analysis of the risk of money laundering and terrorist financing as well as for complying with additional customer due diligence requirements aimed at combating money laundering and terrorist financing (e.g. the obligation to monitor the business relationship), which presuppose the knowledge gained about customers during identification. Effective systems, procedures and strategies for combating money laundering and terrorist financing must therefore ensure that supervised companies have sufficient information about their customers identity. 3. Explanation of terms 3.1. Identification 11. Identification is divided into two steps: ascertaining the identity and verifying the identity. 12. Ascertaining the identity means obtaining information on the identity of the natural or legal person to be identified. 13. Verifying the identity means validating the information on identity obtained against meaningful supporting documents and information. 14. Ascertaining and verifying the identity may be performed at the same time, and thus it is not always possible to clearly separate these two procedures. 6

7 15. Information on identity must be documented. The obligation to retain information stipulated in Article 40 para. 3 no. 1 BWG applies in this case Information on identity 16. With respect to information on identity, a distinction can be made between necessary information and additional information. Necessary information must be obtained in every case. 2 It may be required to obtain additional information, i.e. in addition to the necessary information, in order to take the appropriate measures required due to the specific risk of money laundering or terrorist financing Natural persons 17. Necessary information on the identity of a natural person 3 includes the first name and surname(s), gender and date of birth. 18. Additional information on the identity of a natural person may include signature, citizenship, place of birth, address(es), postal address, telephone number, address, profession, employer or type of self-employed activity as well as social insurance number or other national identity number Legal persons Necessary information on the identity of a legal person 5 includes the company name (including any existing abbreviation), legal form, country of registration, registering authority and, if available, registration number (for instance, in Austria, the company register number Refer to Chapter X, para. 174 ff. Less stringent measures for the purposes of meeting the obligation to compile the necessary information may only be provided for in the cases described in Article 40a BWG to the extent stipulated by law. In any event, the customer must be identified to the extent that it can be established and proven to the FMA that the conditions for application of simplified customer due diligence apply (Article 40a para. 5 BWG). On the information needing to be verified in the case of natural persons, refer to Chapter III.C.1, para. 24 ff. The terms legal person and legal entity are used synonymously in this Circular. On the information needing to be verified in the case of a legal person, refer below to Chapter III.C.2, para. 37 ff. 7

8 or central register of associations number), place of incorporation 6, purpose of business, first name(s) and surname(s) and date of birth of the managing bodies 7 and of the other persons authorised to represent the company before the supervised company. 20. Additional information on the identity of a legal person may include, for example, postal address, telephone number, fax number, address, website, VAT ID number and, in the case of an affiliated company, the group structure. Additional information on the identity of a managing body and of any other person authorised to represent the company before the supervised company may be the information specified in para. 18 as well as, for example, a certified copy of the company s specimen signatures, as held at the court with jurisdiction over the company register. 21. The type of additional information on the identity of a natural or legal person which needs to be obtained in the specific case will mainly depend on the information required in order to analyse the risk of money laundering or terrorist financing and to appropriately monitor the business relationship in a manner aligned with the particular business transaction If, for instance due to a lack of cooperation on the part of the person to be identified, the necessary and potentially needed additional information on the identity of a natural or legal person cannot be obtained, the supervised company will not be able to comply with the identification obligation. The consequences stipulated in Article 40 para. 2d BWG must then be taken If the IT system 10 that is used to record the identity information does not have enough fields or characters, the information must be recorded in another manner, e.g. in a field for additional remarks or in a hard copy. In this case steps must be taken to ensure that the complete information is provided within a reasonable period of time to the FMA or the OeNB or, in case of applying legal requirements, to the competent authorities and courts This is the place at which central administration of the legal person takes place. The extract from the register may be used as proof of the identity of a managing body representing a legal person. On the information needing to be verified in the case of a managing body, refer below to Chapter III.C.2, para. 38. For details, refer to the FMA Circular on the risk-sensitive approach, as last amended. Refer to Chapter VII.F, para Supervised companies which have a small customer base that is easy to track may opt not to record customer identity information electronically. 8

9 3.3. Meaningful supporting documents Natural persons 24. An official photo identification document is a meaningful supporting document for verifying the information on the identity of a natural person. 25. Pursuant to Article 40 para. 1 BWG, an official photo identification document: is a document that has been issued by a government authority; bears a non-replaceable (i.e. must be attached by the authority), recognisable photograph of the head of the person to be identified; and the name of the person to be identified; the date of birth of the person to be identified; the signature of the person to be identified; as well as the authority which issued the document. 26. When compared, there should be no apparent discrepancies between the head of the person depicted in the photograph and the person that is physically present or between the signature in the photo identification document and the signature of the person that is physically present. The same applies when the age of the person, as calculated based on the date of birth, and the height (if this is included in the photo identification document) are compared with an estimate of the actual circumstances. 27. Individual criteria with regard to the official photo identification document pursuant to Article 40 para. 1 BWG may be waived where technical advances give rise to other criteria which are equivalent to the waived criteria in terms of their identification effects. Thus, biometric data of the document holder which is stored in the photo identification document, for example, could replace the signature of the person to be identified. Prior to a permanent business relationship being established, a signature sample of the person to be identified must be obtained. In the case of other banking transactions, taking appropriate, risk-based due diligence measures to combat money laundering and terrorist financing may require the obtaining of a signature sample. 9

10 28. A photo identification document such as a physicians identification card is also considered issued by a government authority when issued within the context of the cardholder s official responsibilities. 29. Austrian photo identification documents which are suitable in any case for the identification of natural persons include passports, personal identification cards and driving licences. Other official photo identification documents (e.g. hunters identification cards or firearm licences) must be verified individually for compliance with the criteria. 30. In particular photo identification documents which have not been issued by a government authority or photo identification documents having a photo which the holder himself has attached or which may be replaced without leaving any identifiable marks are not suitable for identifying natural persons. The aforementioned is most often true for public transportation passes, student identification cards and skiing passes. 31. Passports and personal identification cards with an expired validity may be used for identification in exceptional cases if there are no other grounds for doubt. 32. Foreign official photo identification documents which comply with the mandatory criteria are to be considered equivalent to Austrian photo identification documents Foreign travel documents which, in accordance with the laws of the issuing country, do not contain the complete date of birth may nonetheless be used for verifying identity. If, however, the travel document contains no information whatsoever on the age of the holder, and if there are doubts as to the identity of the holder of the travel document, additional proof (e.g. birth certificate) is required. 34. The required information on the identity of a natural person which must be verified on the basis of the photo identification document results from the criteria applying to a photo identification document within the meaning of Article 40 para. 1 BWG. According to these criteria, in all cases the first names, surnames and date of birth given in the photo identification document must be verified to correspond with the information obtained. Furthermore, within the scope specified under para. 26 comparison must be made between 11 The Federal Ministry for European and International Affairs publishes a list of travel documents that are suitable for admittance to Austria Buergerservice_Zentrale/ReiseGrenzverkehr/Einreisevoraussetzungen_nach_OEsterreich.pdf. This list may serve as a guideline for determining the suitability of foreign travel documents for the purpose of identification. Conversely, a regulation by the Federal Minister of Internal Affairs (Federal Law Gazette II No. 263/2007) specifies certain types of travel documents, issued by third countries, which are not suitable for compliance with passport requirements and they may therefore not be used for identification. 10

11 the head of the person depicted in the photograph and the person that is physically present or - if obtaining a signature sample is required 12 - between the signature in the photo identification document and the signature of the person that is physically present. Unless a good, legible copy of the photo identification document is made and kept, the identification document information (i.e. the type of photo identification document, the issuing authority, the date of issue and the document number) should be recorded and kept along with the identity information. 35. All other necessary and any required additional information on identity which may be verified or compared on the basis of the photo identification document should additionally be verified or compared within the scope mentioned under para. 26. Other necessary as well as any additional information on the identity of a natural person to be obtained should be verified in a risk-based manner against other documents, data or information stemming from a credible source. In the latter case, customer documents and information from the Internet may additionally be used to verify the identity. 36. It has proven very useful in practice to make and keep copies of identification documents, since this allows errors in transferring information to be recognised afterwards, on the basis of the copy, as well as another verification of the photo identification document against the copy if any doubts arise later. Care should be taken in such cases that copies are of sufficient quality Legal persons 37. Extracts from a register kept by the registering authority (e.g. extracts from the company register or central register of associations) or extracts from databases which are generally recognised for legal use are meaningful supporting documents for verifying the identity of legal persons registered in Austria. 38. All necessary and any additional information needing to be obtained on the identity of a legal person, which may be verified against the extract from the register, must be verified against the extract from the register. Other necessary as well as any additional information on the identity of a legal person to be obtained should additionally be verified in a risk-based manner against other documents, data or information stemming from a credible source. 12 On the question of when it is required to obtain a signature sample, refer to Chapter III.C.1, para

12 39. Meaningful supporting documents for the purpose of verifying the identity of legal persons registered in a foreign country are primarily extracts from registers which are comparable to extracts from Austrian registers. If the extracts from the foreign register do not provide as much information as the Austrian register, or if the laws of the registering country do not provide for documents comparable to extracts from Austrian registers, the identity of the foreign legal person must be (additionally) verified against other documents, data or information stemming from a credible and independent source. 13 In this case nationally applicable standards may be considered to a reasonable extent. If none of the individual identity documents fulfils the legal requirements when taken by itself, the identity of the legal person must be verified by reviewing several identity documents. 40. Extracts from registers and comparable foreign identification documents for legal persons should be recent and, if possible, no more than 6 weeks old. This is to prevent the supervised company concerned from contracting with a legal person which possibly no longer exists. 41. In regular intervals to be determined by risk-based methods, supervised companies must additionally have current extracts from registers submitted by customers with whom they maintain a permanent business relationship (Article 40 para. 2a no. 3 BWG). 42. Foreign identification documents should be submitted along with a translation certified by a recognised certification authority. It is also permissible for company employees to prepare working translations. Information on identity which is necessary and which may be additionally needed should be retained in German or English. 43. A recognised certification authority refers to a certification authority in accordance with the respective national law. In order for certification to be legally valid, the certification authority must comply with the regulations governing certification which apply to that authority. An apostille must then be obtained for the certified document, or it must be finally certified and legalised for Austria Other documents, data or information stemming from a credible and independent source which can be used as proof for the identity of a legal person may be, for example, a licence from a government authority, confirmation of membership in a chamber of commerce, information from banks, confirmation of tax registration or minutes of the general meeting. An apostille is a simplified form of legalisation (i.e. diplomatic certification) of public documents for legal use at the international level. For countries which signed the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents ( the apostille replaces any other legalisation required and represents final certification of a document in the home country. 12

13 44. If, due to a lack of meaningful supporting documents, the necessary and any required additional information on the identity of a natural or legal person cannot be reliably verified, the supervised company will not be able to comply with the identification obligation pursuant to Article 40 para. 1 BWG. The consequences stipulated in Article 40 para. 2d BWG must then be taken Parties addressed by identification obligations 45. The obligation to ascertain and verify the identity of a customer is directed at supervised companies. These comply with the obligation through their employees, assistants and qualified third parties within the meaning of Article 40 para. 8 BWG. Recourse to qualified third parties is permitted provided that the supervised companies are not aware of any information that would cast doubt on equivalent fulfilment of the obligations in question Supervised companies 46. Supervised companies comply with their identification obligations primarily through their employees. 47. In connection with special business arrangements (e.g. banking transactions linked with leasing contracts), supervised companies may utilise the services of assistants (e.g. seller of the leasing property) to fulfil their identification obligations. 48. Assistants, while not employees of the supervised company, are nonetheless bound by a contractual relationship to the supervised company. The parties may not enter the 15 In the case of foreign documents from countries which are not members of the Hague Convention or which have no bilateral agreement with Austria, national procedures for certification in the country of origin must first be completed and the document then finally certified by the foreign ministry of that country (Letztbeglaubigung). The document must then be legalised by the competent Austrian representation in the country of the document s origin in order to be legally valid in Austria (Überbeglaubigung). Refer to for more details. Refer to Chapter VII.F, para

14 contractual relationship solely in order to pass on identification obligations to other parties. In fact the relationship must serve comprehensively a commercial purpose. 49. The contractual relationship must exist with the natural or legal person acting as assistant. This natural or legal person may in turn rely on their employees in order to fulfil identification obligations. 50. Assistants must be regarded as a part of the supervised company, which is subject to the obligation to fulfil customer due diligence obligations to the end of combating money laundering and terrorist financing. Appropriate measures must be taken to familiarise assistants, in the same way as employees, with customer due diligence obligations for combating money laundering and terrorist financing, and specifically with identification obligations. This purpose is served in particular by participation in training measures and by regularly receiving information on any changes of law or current developments in preventing money laundering and terrorist financing. 51. Supervised companies are responsible for their employees or assistants not fulfilling identification obligations. Regardless of whether employees and assistants are active in Austria or abroad, they must apply the identification regulations which are relevant to the supervised company. 52. Assisting parties must provide the supervised company immediately with the identity information (including identification document information 16 ) and documentation used in complying with the identification obligation Third parties 53. Supervised companies may also, for the purposes of fulfilling their identification obligations pursuant to Article 40 para. 8 BWG, make use of qualified third, parties provided that there are no indications that would raise doubts on these obligations being fulfilled in an equivalent manner. Article 40 para. 8 BWG refers in turn to provisions of European law for a definition of qualified third parties. Qualified third parties within the meaning of Article 40 para 8 BWG mainly include: 16 Refer to Chapter III, para

15 EEA credit and financial institutions, and the payment institutions referred to in Article 3 para. 4 of the Zahlungsdienstegesetz (ZaDiG; Payment Services Act) 17 This includes Austrian credit institutions, 18 Austrian insurance undertakings, Austrian investment firms, Austrian financial institutions and Austrian payment institutions, as well as EEA credit, financial and payment institutions and their branch offices in Austria. Credit and financial institutions in a third country, provided that equivalency exits External auditors, external accountants, tax advisers, notaries and other independent legal professionals 19 This should be understood to mean statutory auditors within the meaning of the Unternehmensgesetzbuch (UGB; Corporate Code), chartered accountants and tax advisers within the meaning of the Wirtschaftstreuhandberufsgesetz (WTBG; Act on Article 3(1) of Directive 2005/60/EC defines a credit institution as a credit institution, as defined in the first subparagraph of Article 1(1) of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions, including branches within the meaning of Article 1(3) of that Directive located in the Community of credit institutions having their head offices inside or outside the Community. Article 3(2) of Directive 2005/60/EC, in the amended version of 2009/110/EC, defines a financial institution as: a) an undertaking other than a credit institution which carries out one or more of the operations included in points 2 to 12 and 14 and 15 of Annex I to Directive 2006/48/EC, including the activities of currency exchange offices (bureaux de change); b) an insurance company duly authorised in accordance with Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance, insofar as it carries out activities covered by that Directive; c) an investment firm as defined in point 1 of Article 4(1) of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments; d) a collective investment undertaking marketing its units or shares; e) an insurance intermediary as defined in Article 2(5) of Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation, with the exception of intermediaries as mentioned in Article 2(7) of that Directive, when they act in respect of life insurance and other investment related services; f) branches, when located in the Community, of financial institutions as referred to in points (a) to (e), whose head offices are inside or outside the Community. Credit institutions which hold a licence only for conducting exchange bureau business (Article 1 para. 1 no. 22 BWG) may not act as third parties. Art. 2(1)(3)(b) of Directive 2005/60/EC mentions notaries and other independent legal professionals, when they participate, whether by acting on behalf of and for their client in any financial or real estate transaction, or by assisting in the planning or execution of transactions for their client concerning the: i) buying and selling of real property or business entities; ii) managing of client money, securities or other assets; iii) opening or management of bank, savings or securities accounts; iv) organisation of contributions necessary for the creation, operation or management of companies; v) creation, operation or management of trusts, companies or similar structures. 15

16 the Profession of Financial Trustees), notaries within the meaning of the Notariatsordnung (NO; Code of Professional Conduct for Notaries) and attorneys at law within the meaning of the Rechtsanwaltsordnung (RAO; Code of Professional Conduct for Attorneys at Law). 54. These third parties may be relied on to fulfil identification obligations when they: are subject to mandatory professional registration, recognised by law; and must apply: in the case of Austrian third parties, the customer due diligence requirements for combating money laundering and terrorist financing which apply to their profession; in the case of third parties from EEA Member States, the customer due diligence requirements for combating money laundering and terrorist financing which have been standardised by implementing Directive 2005/60/EC; in the case of third parties from third countries, due diligence requirements equivalent to Directive 2005/60/EC for combating money laundering and terrorist financing; and their compliance with those requirements is supervised in accordance with Section 2 of Chapter V of Directive 2005/60/EC, or they are situated in a third country which imposes equivalent requirements to those laid down in Directive 2005/60/EC. 55. The above third parties from Austria and the EEA (which as well as the EU Member States also includes Iceland, Liechtenstein and Norway) meet these three conditions. With regard to third parties from third countries, the supervised company may rely only on third parties from countries having standards which have been expressly designated as equivalent 20 in a statement published by the FMA. Should the supervised company have information which raises doubts as to the equivalency of the standards in third countries, the company should inform the FMA of this fact and take measures to effectively counteract the consequent risk of money laundering and terrorist financing. 20 See in this regard the list of equivalent third countries at 16

17 56. The supervised company which relies on third parties bears ultimate responsibility for fulfilling the identification obligations. 57. In accordance with Article 40 para. 8 BWG, the supervised company must ensure that the third party makes identity data available to them immediately after identification. Identity documents (i.e. originals or copies) and identification document information may remain with the third party for the time being, whereas the supervised company must ensure that the third party forwards this information to the supervised company immediately upon request. 58. Third parties from equivalent third countries may comply with the identification obligations stipulated by the respective national law. Similarly, supervised companies may even accept identity data and documents (which have been obtained and verified by fulfilling the identification obligations governing the third party concerned) other than those required in Austria as long as the equivalency of the identity data and documents is ensured. 5. Identification procedures 5.1. Obtaining information on identity 59. The person to be identified must be called upon in due time to provide the necessary 21 as well as any required additional 22 information on their identity, so that identification may be completed before the business relationship begins or before the transaction is executed. 23 This request can be made either during a personal meeting with the person to be identified or by requesting an appropriate form to be completed. 60. If the customer fails to comply with the request and if the credit and financial institutions are thus not able to adhere to paras. 1, 2 and 2a of Article 40 BWG on customer identification and acquisition of other requisite information on the business relationship, they may not engage in any transaction or establish any business relationship and must terminate Refer to Chapter III.B, paras. 17 and 19. Refer to Chapter III.B, paras. 18 and 20. On the exception stipulated in Article 40 para. 2c BWG, allowing an account to be opened before identification is completed, refer to Chapter VII.A, para

18 any existing business relationship. Moreover, consideration should be given to sending a report on the customer to the Financial Intelligence Unit Verifying the information on identity obtained 61. In order to verify the information on identity obtained, the person to be identified must be called upon to provide the required 24 proof of identity. Natural persons must provide proof of identity personally by means of original documents. 25 The presentation of copies or oral statements alone is equally as insufficient as presentation by a natural person other than the person to be identified. Particularly in the case of unusual documents, additional risk-based measures are required to verify the identity of the natural person (including for example research using databases or the internet). Information on the authenticity of the submitted document should also be obtained. 62. Unless a (legible) copy of the photo identification document is made anyway, the type of photo identification document as well as the issuing authority, date of issue and number of the photo identification document must be recorded during verification of the identity of natural persons. In this way it is ensured that the photo identification document may be viewed if necessary at the office of the issuing authority Verifying the authenticity of proof of identity 63. Supervised companies must not have any doubts as to the authenticity of the proof of identity presented. Consequently, within the framework of training measures as specified in Article 41 para. 4 no. 3 BWG, supervised companies must familiarise those employees who are involved in carrying out identification or any assistants who are involved in carrying out identification 26 with the appearance and the security features of common Austrian photo identification documents and, in accordance with their customer groups, from abroad in order to be able to verify the authenticity of proof of identity. Employees involved in identification as On the information needing to be verified in the specific case, refer to Chapter II.B, para. 16 ff. Exceptions exist pursuant to Article 40b para. 1 no. 1 BWG for non-face to face transactions, pursuant to Article 40 para. 2 BWG for the identification of the trustor and pursuant to Article 40a para. 2 no. 2 BWG for school savings schemes. Refer to Chapter IV.A, para. 47 ff. 18

19 well as any assistants charged with this task should additionally be acquainted with the phenomenon of invented identification documents. In the case of doubt as to the authenticity of official photo identification documents or other meaningful supporting documents, additional investigation must be carried out to a reasonable extent and specifically information must be obtained on the authenticity of the proof of identity presented. 64. The Federal Ministry of Internal Affairs may be contacted for information on authentic identity and travel documents from Austria and abroad (post@bmi.gv.at). Useful information in this regard is also provided by the Public Register of Authentic Identity and Travel Documents Online (PRADO), hosted by the General Secretariat of the Council of the European Union, at 6. Persons whose identity must be ascertained and verified 6.1. Customers (Article 40 para. 1 BWG) Definition 65. A customer is anyone who concludes a contract with a supervised company for a banking transaction. The customer has rights and obligations towards the supervised company. Both natural and legal persons may be customers Scope of identification obligations 66. Supervised companies must obtain the necessary information on identity as well as any additional information on identity which is required in the specific case. 27 Verification of the 27 Refer to Chapter III.B, para. 16 ff and also the FMA regulation on Money Laundering and Terrorist Financing Risk (GTV, Federal Law Gazette II No. 377/2011). 19

20 necessary as well as potential additional identity information needing to be obtained must be carried out using meaningful supporting documents of identity Special case of minor customers 67. Strict adherence to formal requirements is not necessary in the case of customers who are legal minors. The fact that minors sometimes do not have an official photo identification document will need to be taken into account. 68. Customers who are legal minors and do not possess an official photo identification document, and who cannot be reasonably expected to obtain an official photo identification document for the purpose of conducting identification procedures, may by way of exception be identified by using a document appropriate for the age of the person. As long as not unusually large amounts of funds, from a risk-sensitive point of view, or unusual banking transactions are involved, even pseudo identification documents otherwise not suitable for identification, such as a birth certificate, an entry in the parents passport 30 or a student identification card, may be used to verify the information on minor customers. 69. Yet only documents will be acceptable as proof of identity. Oral statements alone are by no means sufficient. 70. The remaining customer due diligence obligations must always be fulfilled to the full extent in the case of customers of minor age. 71. Beyond this, identification obligations apply to the full extent to the legal representatives of minor customers. 72. The identity information of minors above the age of 14, who are legally able to act on their own behalf, must always be verified against an official photo identification document within the meaning of Article 40 para. 1 BWG. With regard to any business relationship with a minor above the age of 14 that requires the consent/involvement of the minor s legal Refer to Chapter III.C, para. 24 ff. Reference is made here of the identification obligations stipulated in Article 78 para. 9 no. 4 BWG for customers with a place of incorporation or place of residence in a non-cooperative country. Currently, there is no longer any scope of application for this provision since the federal government regulation on non-cooperative countries was revoked with Federal Law Gazette II No. 495/2004. Pursuant to Article 78 para. 8 BWG, supervised companies are obliged to keep up with current information regarding non-cooperative countries. It should be noted that entries in parents' passports will cease to be valid with effect from 15 June

21 representative, the identification obligations will also apply in respect of the minor s legal representative Special case of trustees (Article 40 para. 2 BWG) Definition 73. Anyone who executes banking transactions for someone else, and who does not serve as representative in this case, is a trustee within the meaning of Article 40 para. 2 BWG and must be identified accordingly. Pursuant to Article 40 para. 2 BWG, trustees conclude banking transactions for the account of or on behalf of a third party. The wording of Article 40 para 2 BWG is widely encompassing. 74. Trustees are customers. Therefore, they also have rights and obligations towards the supervised company. Conducting banking transactions on a trust basis can be an effective means of disguising money laundering or may facilitate terrorist financing. Thus, Article 40 para. 2 BWG ensures the required amount of transparency when conducting banking transactions on a trust basis. Likewise, customers who conduct banking transactions as a trustee must reveal their trustee relationship. To this end, supervised companies must call upon the customer to indicate whether they intend to conduct the business relationship or the transaction for their own account, or for the account of or on behalf of a third party. The customer is legally obliged to comply with this request and must provide notification of any changes during an existing business relationship without delay and without being prompted to do so. 31 Particular attention should be paid in this regard to the obligation of the supervised companies to update identity data and documentation Supervised companies must ascertain in the individual case whether or to what extent a banking transaction that is conducted on a trust basis is also subject to enhanced customer due diligence obligations. For some products, trust relationships are widely used as an internationally recognised feature of the comprehensively supervised wholesale financial markets. An obligation to take enhanced due diligence measures does not automatically 31 Cf. Article 40 para. 2 BWG. If the customer fails to comply with the disclosure obligations, the customer is guilty of an administrative office and will be prosecuted by the FMA. 32 Refer to Chapter IX, para. 168 ff. 21

22 arise from the fact alone that there is a trust relationship in this particular case. Enhanced customer due diligence measures are, however, necessary in the case of trust relationships which are especially prone to misuse for purposes of money laundering or terrorist financing Scope of identification obligations 76. On account of the special activities of trustees, in addition to the due diligence measures applying to customers, 33 Article 40 para. 2 BWG stipulates the following two additional requirements for the identification of trustees: The identity of the trustee must be ascertained exclusively in the physical presence of the trustee. Identification of the trustee is therefore not permissible in the context of a non-face to face transaction. Identification of trustees by third parties, as specified in Article 40 para. 8 BWG, and assistants is precluded Trustors (Article 40 para 2 BWG) Definition 77. Trustors are the natural or legal persons for whose account or on whose behalf a business relationship is established or a transaction executed. 78. With respect to the banking transactions which the trustee conducts for the trustor, the supervised company maintains no contractual relationship with the trustor. Unless special regulations exist for the trustor, when applying customer due diligence requirements for the purpose of combating money laundering and terrorist financing, the trustor must be treated like a customer. The trustor has no right to dispose of an account held by the trustee on his behalf unless power of disposal has been specifically granted. 79. Like the beneficial owner of a legal person, the trustor is the beneficiary of the banking transaction conducted on his behalf. By stipulating the obligation to identify the trustor, Article 40 para. 2 BWG ensures the necessary degree of transparency in trustee 33 Refer to Chapter V, para. 59 ff. 22

23 relationships in order to prevent the misuse of trust arrangements in banking transactions for the purposes of money laundering and terrorist financing Scope of identification obligations 80. The trustee must ascertain the identity of the trustor personally or through reliable sources and confirm this fact in a written declaration to the supervised company. Reliable sources refer to courts and other government authorities, notaries, attorneys at law and third parties as specified in Article 40 para. 8 BWG, under the condition that they have their official fields of activity, places of incorporation or places of residence in a country which on its territory or in its jurisdiction adopts measures against money laundering and terrorist financing 34 that are equivalent to Austrian standards. 81. In addition, the trustee must cooperate with the supervised company in the indirect identification of the trustor by providing, upon the request of the supervised company, the necessary information on the identity of the trustor as well as any additional information which may be required and by submitting proof 35 of the necessary information on the identity of the trustor as well as any additional information which may be required. 82. If the trustor is a natural person, the supervised company must verify the necessary information on the identity of the trustor against the original or a legible copy of the trustors s official photo identification document. The supervised company must verify in a risk-based manner any other required additional information on the identity of the trustor against additional meaningful supporting documents If the trustor is a legal person, the supervised company must verify the necessary as well as any required additional information 37 on the identity of the trustor against meaningful supporting documents. 38 The trustee must submit the original documents On the equivalency of third countries, refer to Chapter IV.B, para. 55. On the question of the necessary and additional information on the identity which is subject to proof, refer to Chapter III.B, paras. 17f and 19f. On the question of what is meant by meaningful supporting documents, refer to Chapter III.C, para. 24 ff. On the question of the necessary and additional information on the identity which is subject to proof, refer to Chapter III.B, paras. 17f and 19f. On the question of what is meant by meaningful supporting documents, refer to Chapter III.C, para. 24 ff. 23

24 84. The last sentence of Article 40 para. 2 BWG allows simplified procedures for providing proof for the identity of trustors acting on behalf of joint ownership associations for real estate properties: In the event that: the trustee is an authorised real estate administrator; the trustors are several natural persons who jointly own a real estate property (joint ownership association) managed by the real estate administrator; and the trustor exclusively executes banking transactions in connection with managing the property, the supervised company may also verify the identity of the trustors against an extract from the property register on the property concerned which is presented by the authorised real estate administrator. These simplified procedures for providing proof of identity do not apply to sole owners of property or to legal persons who are joint owners of property. 85. Subject to an assessment of low risk, Article 40a para. 4 BWG allows for additional simplified procedures for providing proof for the identity of trustors in the case of fiduciary accounts held for their clients by attorneys at law or notaries from EEA Member States and from third countries, the latter provided that these are subject to requirements equivalent to FATF standards with regard to the suppression of money laundering and terrorist financing and are supervised for compliance with such requirements. 39 Article 40a para. 4 BWG transfers responsibility for conducting identification of the trustors to the attorney at law or the notary Specifically, Article 40a para. 4 BWG stipulates that credit and financial institutions may apply measures that are less stringent than the obligations determined in Article 40 para. 1 nos. 1, 2 and 5 and paras. 2 and 2a BWG subject to the risk of money laundering and terrorist financing being assessed as low under the following cumulative conditions: Individual verification is infeasible due to the representation of large co-ownership communities of changing composition On the equivalency of third countries, refer to Chapter IV.B, para. 55. The special provisions of Article 9a RAO and Article 37a NO apply to Austrian attorneys at law and notaries. 24