FAQs

CDD must be performed:

• in all circumstances of suspicion of a financial crime, irrespective of risk or any exemption applied, or threshold allowed by legislation; and
• on an ongoing basis to ensure that business activity is consistent with the institution’s knowledge of the customer, as required by section 21 of the AMLTF Code of Practice.

Identification is the process of gathering and recording information about an applicant for business, customer, or beneficial owner to establish who they are. The information that should be collected to assist in the identification of an applicant for business or customer may differ based on whether the applicant for business or customer is an individual, a legal person or a legal arrangement.

For the purposes of the AMLTF Code of Practice, a legal person refers to a body corporate. The Explanatory Notes to section 25 of AMLTF Code of Practice stipulates that a legal person covers bodies corporate including partnerships, companies, foundations, anstalts, Waqf, associations, any incorporated or unincorporated clubs, societies, NPOs, friendly societies established pursuant to the Friendly Societies Act (Cap. 268), provident societies or cooperative societies established pursuant to the Cooperative Societies Act (Cap. 267), and any similar bodies.

A legal arrangement refers to a trust or other similar arrangements such as:

• fiducie,

• treuhand, and

• fideicomiso.

In the Virgin Islands, trusts are the only legal arrangements that are established.

Section 24 (2) of the AMLTF Code of Practice stipulates that FIs and DNFBPs must obtain the individual’s:

• full legal name (including any former name, other current name or aliases used);
• gender;
• principal residential address; and 
• date of birth.

Section 28 (1) of the AMLTF Code of Practice stipulates that FIs and DNFBPs must obtain proof of existence of the legal arrangement and information regarding:

• name and legal form;
• date and country of establishment;
• name and address of the agent (if any);
• nature and purpose;
• the powers that regulate and bind the legal arrangement, as well as the names of the relevant persons having a senior management position; and
• the ownership and control structure of the legal arrangement.

In addition, FIs and DNFBPs must:

• identify and verify the identities of each beneficial owner, and any person acting on behalf of the legal arrangement; and
• understand the nature of the legal arrangement’s business and its ownership and control structure.

In accordance with section 24 (1) of the AMLTF Code of Practice, identification and verification should be undertaken where an individual in relation to the applicant for business is:

• the applicant or joint applicant;
• the beneficial owner;
• a director, or a person with a similar position responsible for the management; or
• acting on behalf of the applicant.

In accordance with section 24 (1) of the AMLTF Code of Practice, identification and verification should be undertaken where an individual in relation to the applicant for business is:

• the applicant or joint applicant;
• the beneficial owner;
• a director, or a person with a similar position responsible for the management; or
• acting on behalf of the applicant.

The identification information must be verified through appropriate documentation, which may include:

• a valid passport;
• a valid driver’s license;
• a national identity card; or
• any other government-issued document.

Additional documents to support a customer’s identity include utility bills or current bank statements issued by regulated financial institutions.

In accordance with section 25 (1) of the AMLTF Code of Practice, identification and verification should be undertaken where the legal person is:

• the applicant for business;
• a shareholder of the applicant for business (holding 10% or more interest or voting rights);
• a director of the applicant for business; or
• a third party acting or purporting to act on behalf of the applicant for business.

As outlined in section 25 of the AMLTF Code of Practice, identification information must be evidenced by documents, which should include, but are not limited to:

• constitutional documents (i.e., memorandum and articles of association, partnership agreement, by-laws, charters or similar document);
• certificate of incorporation, registration, or formation;
• trade licence, registration certificate or regulatory licence (where applicable);
• powers of attorney or other authorities given by the directors;  
• a signed director’s statement as to the nature of the company’s business;
• verification documents for each beneficial owner, director or person holding s similar position of responsibility and any person acting on behalf of the  legal person; and where the legal person is a company, such other additional document that is considered essential to the verification process

Additional documents may include:

• a certificate of good standing or similar document confirming registration in the place of incorporation, registration, formation or continuation;
• copies of previous bank statements or financial reference; and
• copies of audited financial statements within the last year of the establishment of the business relationship

The required identification information relative to a trust must be evidenced by a copy of the trust deed and any amendments. Where the trust is yet to be established, FIs and DNFBPs may obtain copies of:

• draft trust deeds;
• contractual agreements;
• declarations from the settlor;
• and verification documents of the source of assets to be settled, to verify the details of the proposed legal arrangement.

Where an FI or DNFBP establishes a business relationship or undertakes a one-off transaction with, or for another form of legal arrangement other than a trust, equivalent verification measures must be undertaken.

The AMLTF Code of Practice allows different timelines for the identification and verification of beneficiaries. Refer to FAQ on When CDD should be undertaken for the beneficiaries of a trust or life insurance policy, and note that section 23 (2Ba) of the AMLTF Code of Practice permits verification of beneficiaries after the business relationship has been established, if it takes place:

• at or before payout; or
• at or before the time the beneficiary exercises a vested right under the legal arrangement.   

Consequently, only beneficiaries who have a vested right to a legal arrangement must be verified.

CDD should be based on risk. The amount of information and verification required depends on the level of financial crime risk, including ML, TF, and PF risk posed by the applicant for business or customer. Accordingly, an FI or DNFBP must first assess the risk and rate each applicant for business or customer. This initial customer risk assessment will help the FI or DNFBP determine how much information to collect and verify during the CDD process, including:

• the reduced simplified CDD measures that may be applied for low-risk applicants or customers (as described in the FAQ – What is Simplified Customer Due Diligence); and
• any additional enhanced CDD measures that must be applied for higher risk applicants or customers (as described in the FAQ – What is Enhanced Customer Due Diligence).

Not all customers within a risk category are the same, as they may pose different types of risks (e.g. higher risks based on geographic exposure, or higher risk based on business activities). Consequently, the level and type of CDD, enhanced CDD, or simplified CDD applied for an applicant for business or a customer should take into account the particular circumstances of each applicant for business or customer, on a case-by-case basis.

Simplified CDD, are reduced due diligence measures that may be applied by FIs or DNFBPs to customers that have been assessed as posing a low risk in terms of business relationship, which includes considering the ML, TF, and PF risks identified by a Virgin Islands’ national risk assessment or a risk assessment conducted by a relevant authority (see section 19 (7) of the AMLTF Code of Practice).

To make this determination, the FI or DNFBP may consider applicable factors such as:

• the source of fixed income;
• whether the customer is a:
  • financial institution regulated for AML/CFT/CPF compliance;
  • publicly listed company subject to regulatory disclosure requirements;
  • government statutory body;
• life insurance policies with annual premiums of $1,000 or less;
• pension scheme insurance policies with no surrender clause and cannot be used as collateral;
• where the body corporate is part of a group that is subject to and adequately supervised for AML/CFT/CPF compliance consistent with FATF Recommendations; and
• other factors included in section 19 (6) of the AMLTF Code Practice.

Where such low risk is determined, the due diligence measures outlined in sections 19 (2), (3) and 4(b) may be applied in a simplified manner.

Enhanced CDD (ECDD), as defined by section 20 (1) of the AMLTF Code of Practice, refers to the additional steps an FI or DNFBP is required to take when dealing with applicants for business, customers, and one-off transactions that present a higher risk. ECDD may include:

• undertaking research to understand the background and the business of the applicant for business or customer, and verifying this information (e.g. using open-source intelligence available through public databases, websites etc.);
• obtaining evidentiary documentation to confirm the source of funds or source of wealth of the applicant for business or customer, including the beneficial owners, and verifying this information (e.g. asset and income declarations);
• obtaining senior management approval to commence or continue the business relationship with a higher risk applicant for business or customer;
• requiring senior management sign-off when engaging in transactions with a higher risk applicant for business or customer; and
• conducting enhanced monitoring of the business relationship (e.g. increasing the number and timing of controls applied and frequency of reviews, obtaining information on the reasons for a particular transaction, and selecting patterns of transactions that need further examination).

Each FI or DNFBP should adapt the enhanced measures based on the specific risks associated with its customer base.