Central Bank to banks:
Know your real client

Central Bank’s decision is part of anti-money laundering compliance

The Central Bank (BDL) has issued a circular instructing banks and financial entities to identify the ultimate owners or controllers, technically called ’beneficial owners’, of their institutional and individual clients.

They must also open a specific register that lists the names of the ultimate beneficial owners for each of their customers.

The circular comes in compliance with the recommendations of the Financial Action Task Force (FATF). FATF is an international inter-governmental body that develops policies to protect financial systems against money laundering and terrorist financing.

A beneficial owner is defined by the circular as a natural person who ultimately owns or effectively controls directly or indirectly a customer of a bank or of another financial entity. The customer could be a natural person or a legal entity such as a company, an institution, or a legal arrangement such as trusts. Legal persons also include non-profit organizations such as mutual funds, cooperatives, welfare centers, charities, clubs, and other entities.

A beneficial owner could also be a natural person on whose behalf a transaction is performed.

When bank clients are legal entities, the natural persons who own 20 percent or more of these entities directly or indirectly are considered the beneficial owners and they must be identified by the banks. In case there is not one natural person that owns 20 percent or more of the legal entity, other criteria must be used to identify the beneficial owners such as majority voting rights, or the right to appoint or dismiss the entity’s administrative board. When even these criteria cannot be applied, people holding top managerial positions must be considered beneficial owners.

Besides banks, the entities that are required to apply this circular include financial institutions, issuers or marketers of all kinds of payment and loyalty cards, foreign exchange dealers, finance leasing companies, electronic money transfer companies, and specialized lending entities (comptoirs de crédit).