Simplified due diligence

Simplified due diligence

Contents

What is simplified due diligence?

Simplified due diligence is a phrase used in the 2007 Regulations which means that a business is not required to apply the standard customer due diligence measures laid out in Regulation 7, where the business has reasonable grounds for believing that a client falls into the relevant categories.

Businesses who may be permitted to apply the simplified due diligence exemptions but who perceive other than a low risk of money laundering in a specific case, should consider applying their standard or enhanced due diligence processes.

In any case where a client or potential client has been subject to simplified due diligence and a suspicion or money laundering or terrorist financing arises in relation to that client, the simplified due diligence provisions must no longer be applied and the standard customer due diligence requirements of Regulation 7 must be applied, subject to any tipping off issues.

Who qualifies for simplified due diligence?

The following clients and products qualify:

  • A credit or financial institution which is subject to the requirements of the third money laundering directive
  • A credit or financial institution in a non-EEA state which is supervised for compliance with requirements similar to the third money laundering directive
  • Companies listed on a regulated EEA state market or a non-EEA market which has similar disclosure requirements to European Community legislation
  • Beneficial owners of pooled accounts held by a notary or independent legal professional, i.e. financial services firms are not required to apply CDD to the third party beneficial owners of omnibus accounts held by solicitors, provided the information on the identity of the beneficial owners is available upon request
  • UK public authorities
  • A non-UK public authority which:
    • Is entrusted with public functions pursuant to the treaty on the European Union or the Treaties on the European Communities, or Community secondary legislation
    • Has a publicly available, transparent and certain identity
    • Has activities and accounting practices which are transparent
    • Is accountable to a community institution, the authorities of an EEA state or is otherwise subject to appropriate check and balance procedures
  • Certain insurance policies, pensions or electronic money products
  • Products where:
    • They are based on a written contract
    • Related transactions are carried out through a regulated credit institution
    • They are not anonymous
    • They are within relevant maximum thresholds
    • Realisation for the benefit of a third party is limited, investment in assets or claims is only realisable in the long term, cannot be used as collateral and there cannot be accelerated payments, surrender clauses or early termination