Handbook on Countering Financial Crime and Terrorist Financing

The Commission is undertaking a short consultation on changes proposed to rules and guidance in Chapters 3 and 7 of the Handbook on Countering Financial Crime and Terrorist Financing (“the Handbook”) (version issued 30 October 2020) on the risk-based approach and on legal persons and legal arrangements. The following is a summary of the proposed changes to the Handbook: -

• When establishing a trust or entering into a business relationship or occasional transaction with a trust, the firm is required to identify any beneficiary in a trust (whether his or her interest under the trust is vested, contingent or discretionary).  The Commission is proposing rules in sections 7.10.1 and 7.10.2 confirming that a firm must at a minimum identify the beneficiaries’ full name and date of birth, however the extent to which the other identification data is obtained by the firm will depend on the likelihood of that person benefiting from the trust, with such an assessment documented.

• When undertaking customer due diligence on a customer which is a trust, the firm is required to understand the ownership and control structure of the trust and identify and take reasonable measures to verify the identity of beneficial owners, including any natural person who is the beneficial owner of the trustee.  The Commission is proposing guidance in section 7.10.3 that for low or standard risk scenarios, where the corporate trustee or its parent is subject to the same or equivalent provisions of the Handbook in the jurisdiction from which its business is conducted and where it is supervised for compliance with those provisions, it may be possible to rely on information provided by the corporate trustee regarding the identity of its ownership and on its control structure by way of a summary sheet and/or structure chart, without the need to gather identification data on those individuals who hold a qualifying ownership interest.  In making such determination, the firm should take note of reports and assessments by the FATF and/or FATF-style regional bodies, in particular of findings, recommendations and ratings of compliance with FATF Recommendation 28 and document the conclusions of its assessment.

• Firms are required to regularly review any relationship risk assessment and the extent to which a business relationship will be monitored must be on the basis of risk. The Commission is proposing some additional guidance in section 3.14 on when these reviews should occur.

Tracked versions of Chapters 3 and 7 of the Handbook are available below:

• Chapter 3
• Chapter 7

These proposed changes are in response to industry feedback on the Handbook and are anticipated to assist firms in meeting the transitional provisions set out in Chapter 17 of the Handbook.  Therefore the Commission is requesting comments on the proposed changes by no later than 5pm on Monday 18 January 2021. Comments should be submitted to [email protected].