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Call for comment: The use of reliance agreements by accountable institutions for customer due diligence on shared clients

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The Financial Intelligence Centre (FIC) has issued a consultation document with regard to reliance agreements. FIA members may submit any comments to Joe Kotze at joe@fia.org.za by no later than 15 November 2019.

The following aspects of the consultation are noteworthy:

An accountable institution may include in its risk management and compliance programme the reliance on another accountable institution for the collection of customer due diligence information. This reliance on a third party accountable institution to conduct the collection of CDD information and documentation directly from the client and provide this CDD to the relying accountable institution, must be in terms of a reliance agreement. A client must also be the shared client of both accountable institutions in relation to a transaction or business relationship. It is not sufficient that a client be the client of both accountable institutions independent of any shared mandate. A scenario whereby the accountable institution simply acts as a third party outsource provider or an agent is explicitly excluded.

The reliance on a third party accountable institution for the completion of CDD measures is not an exemption granted by the FIC, nor is it a process that the FIC either recommends or endorses to be applied by a relying accountable institution. Such reliance however, can be considered as a method employed by a relying accountable institution, in line with their accepted risk based approach, when performing their client take on processes, including the obligation of CDD.

Scope and limitation of application of reliance agreements

An accountable institution can place reliance on:

  • Identification of client and other required persons particulars
  • Verification of client and other required persons particulars
  • Information such as source of funds, source of wealth, geographic location

An accountable institution cannot place reliance on:

  • The AML/CFT risk, and associated rating assigned to the client by the third party accountable institution
  • The screening performed on the client by the third party accountable institution.

An accountable institution may rely on a third party to assist with customer identification and verification on the following conditions:

  • The relying institution should immediately obtain information to identify and verify the customers and their beneficial owners
  • Client information and other relevant data must be made available to the relying institution upon request without delay
  • The third party must have an existing business relationship with the prospective client, and during the course of their business relationship with the client have completed a CDD process

 The draft public compliance communication can be accessed here.

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