Industry Circular 5 of 2026 - Compliance Alerts - Ongoing CDD and Transaction Monitoring

Compliance Alerts: Ongoing Customer Due Diligence and Transaction Monitoring

The British Virgin Islands Financial Services Commission (the FSC) reminds Financial Institutions (FIs) and Designated Non-Financial Businesses and Professionals (DNFBPs) that the initial Customer Due Diligence (CDD) process is essential, as it creates an understanding of applicants for business and their circumstances, develops a profile of each applicant for business’ proposed business activities, and determines the level of money laundering, terrorist financing and proliferation financing (ML/TF/PF) risk posed by each applicant. However, once an applicant for business becomes a customer and commences business activities, and where their circumstances, activities, or risk profile change, it is also essential that FIs and DNFBPs engage in ongoing CDD, including transaction monitoring.

Ongoing Customer Due Diligence

Ongoing CDD is important as it helps FIs and DNFBPs to identify when transactions or behaviours fall outside a customer’s profile, and includes:

• transaction monitoring;
• customer screening; and
• updating CDD information.

When behaviours fall outside a customer’s profile, FIs and DNFBPs must determine whether the customer’s circumstances have changed and consider whether the ML/TF/PF risks of that customer have also changed.

The FSC recently published Frequently Asked Questions (FAQs) to provide further guidance on CDD. These FAQs can help to bring greater clarity for FIs and DNFBPs regarding their CDD obligations. The FAQs can be found here on the FSC’s website.

Transaction Monitoring

Transaction monitoring is an essential element of ongoing CDD, as it aids in detecting unusual transactions and/or activities, and determining whether they can be reasonably explained, or point to suspicious transactions and/or activities. FIs and DNFBPs are expected to have an effective monitoring system in place that:

• flags unusual transactions and/or activities for further examination;
• allows senior management to examine unusual transactions and/or activities promptly; and
• takes appropriate action based on the findings of the examination.

Customer Screening

FIs and DNFBPs also need to be able to detect where a customer (including its beneficial owners) has become a politically exposed person (PEP), has become subject to sanctions, or has been connected to criminal or any higher risk activity. Accordingly, FIs and DNFBPs must have systems in place to regularly screen customers to identify them against sanctions lists and press and media releases.

Updating CDD Information

CDD information received must be reviewed regularly and kept up-to-date, accurate, and appropriate to ensure that FIs and DNFBPs continue to understand their customers and their circumstances throughout the business relationship. This must be done:

• on a risk-sensitive basis, with enhanced frequency and procedures for higher-risk customers; and
• upon certain trigger events determined by the customer’s senior management.

Effective ongoing CDD should be supported by strong oversight and documentation. FIs and DNFBPs should:

• ensure policies and procedures are regularly updated and aligned with current risks; and
• provide ongoing training to staff to ensure awareness of red flags.

For further information on ongoing monitoring, click here to access An Effective Approach to Ongoing Monitoring issued jointly by the FSC and the BVI Financial Investigation Agency for FIs and DNFBPs.

The FSC encourages all FIs and DNFBPs to review the FAQs and other available informational guides on CDD, including the videos posted on the FSC’s website, and incorporate the relevant recommendations into their regulatory frameworks.

Questions in relation to this Industry Circular should be directed to the FSC Compliance Division at [email protected].