The same source mentions that 100% of the financial services compliance professionals said that when they onboard a new business customer they accept business formation documents from them as part of the Customer Due Diligence (CDD) process. However, there is still the question of how can the accuracy of customer-provided information be verified.
In determining when to obtain beneficial-owner information, industry practices suggest that financial institutions use 25% as the ownership threshold. Results from the current study show that in reality more than a third (37%) of responding financial institutions assess owners who have control or ownership starting at 26%, with some even going beyond 50%. AML experts have cautioned that the larger the threshold percentage the greater the risk to a financial institutions’ customer portfolio.
Findings indicate that most organizations currently verify the identity of beneficial owners and about half currently verify beneficial ownership status. Verifying status means confirming whether the natural persons identified as beneficial owners are indeed the beneficial owners of the legal entity.
The financial intelligence institutions collect in-house and supplement with additional third-party data about their customers as a way to mitigate the risk of a shell company tied to a terrorist financier slipping through the system and being on-boarded as a customer.
According to research, the big banks supplement their in-house data with information from adverse media, sources of wealth, and new parties being added to the account far more effectively than small and mid-tier banks. An opportunity, then, exists for smaller institutions (under USD 50 billion in total assets), especially institutions in metropolitan centers, to improve CDD by the use of third-party data.
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