AML/CFTR 4.3.5 Timing of CDD — establishment of business relationship

(1) A firm must conduct CDD for a customer before it establishes a business relationship with the customer.
(2) However, the CDD may be conducted during the establishment of the relationship if:
(a) this is necessary in order not to interrupt the normal conduct of business; and

Examples of where it may be necessary in order not to interrupt the normal conduct of business
1 non-face-to-face business
2 securities transactions
(b) there is little risk of money laundering or terrorism financing and these risks are effectively managed;

Examples of measures to effectively manage risks
1 limiting the number, types and amount of transactions that may be conducted during the establishment of the relationship
2 monitoring large or complex transactions being carried out outside the expected norms for the relationship
(c) the CDD is completed as soon as practicable after contact is first established with the customer; and
(d) the CDD is conducted in accordance with the policies, procedures, systems and controls on the use of the business relationship even before the customer's identity is verified.
Note Under rule 2.1.3 (2) (g), a firm must have policies, procedures, systems and controls that set out the conditions that must be satisfied to permit a customer to use the business relationship even before the customer's identity (or the identity of the beneficial owner of the customer) is verified.
(3) Also, CDD may be conducted for the beneficiary under a life insurance contract after the business relationship has been established if they are conducted at or before:
(a) the time of payout; or
(b) the time the beneficiary exercises a right vested under the contract.
(4) In addition, CDD for a bank account holder may be conducted after the account has been opened if there are adequate safeguards in place to ensure that:
(a) the account is not closed before they are completed; and
(b) no payments are made from the account, and no other transactions are carried out by or on behalf of the account holder, before they are completed.
(5) If the firm establishes a business relationship with the customer under subrule (2), (3) or (4) but cannot complete CDD for the customer, the firm:
(a) must immediately terminate any relationship with the customer;
(b) must not carry out a transaction with or for the customer; and
(c) must consider whether it should make a suspicious transaction report to the FIU.
(6) Subrule (5) (c) does not apply if the firm:
(a) is a lawyer, notary, other legal professional, accountant, auditor, tax consultant or insolvency practitioner; and
(b) is:
(i) providing legal advice to the client; or
(ii) defending or representing the client in, or concerning, legal proceedings, including providing advice on instituting or avoiding legal proceedings.
Note For lawyers, notaries, other legal professionals and accountants, see rule 5.2.4 on giving advice and tipping-off.
Derived by QFCRA RM/2019-8 (as from 1st February 2020)