Know Your Customer (KYC) Obligations2018-08-16T14:48:42+00:00

Know Your Customer (KYC) Obligations

Hance Law Avocats is subject to the Luxembourg Anti-Money Laundering and Terrorist Financing legislation which include the identification and verification of its clients, their identity and business activity. This process is required by Regulators in order to know whom the firm is dealing with.

Clients must provide us with all information and documents required under the KYC procedure.

Legal Framework

The Luxembourg Parliament has adopted bill n° 71281 as a result of voting on 6 February 2018, which implements most of the provisions of the Directive (EU) 2015/849, the so-called 4th anti-money laundering directive (AMLD IV), into Luxembourg law. This Law modifies the Luxembourgish Law of 12 November 2004 on the fight against money laundering and terrorist financing (“the 2004 Law”).

Meanwhile, on April 19, 2018 the EU has adopted 5th Anti money laundering directive which obliges professionals apply a risk-based approach to their CDD requirements and which will be transposed into Luxembourgish legislation during the upcoming 18 months.

Standard KYC Procedure

The following is a non-exhaustive list of factors and types of evidence of potentially lower risk:

  1. Customer risk factors:  (a) public companies listed on a stock exchange and subject to disclosure requirements (either by stock exchange rules or through law or enforceable means), which impose requirements to ensure adequate transparency of beneficial ownership; (b) public administrations or enterprises; (c) customers that are resident in geographical areas of lower risk as set out in point (3);
  2. Product, service, transaction or delivery channel risk factors: (a) life insurance policies for which the premium is low; (b) insurance policies for pension schemes if there is no early surrender option and the policy cannot be used as collateral; (c) a pension, superannuation or similar scheme that provides retirement benefits to employees, where contributions are made by way of deduction from wages, and the scheme rules do not permit the assignment of a member’s interest under the scheme; (d) financial products or services that provide appropriately defined and limited services to certain types of customers, so as to increase access for financial inclusion purposes; (e) products where the risks of money laundering and terrorist financing are managed by other factors such as purse limits or transparency of ownership (e.g. certain types of electronic money);
  3. Geographical risk factors: (a) Member States; (b) third countries having effective AML/CFT systems; (c) third countries identified by credible sources as having a low level of corruption or other criminal activity; (d) third countries which, on the basis of credible sources such as mutual evaluations, detailed assessment reports or published follow-up reports, have requirements to combat money laundering and terrorist financing consistent with the revised FATF Recommendations and effectively implement those requirements.

KYC Checklist:

Individuals

Corporate Entities

Fiduciary Arrangements/Trusts

Ownership and control structure/scheme of the company Yes Yes
Identification document (notarized/certified copies of passport or national ID card) Yes Yes Yes
Ø  Beneficial owners Identification

Ø  Declaration of the Beneficial Owner

Ø  Declaration of Beneficial Ownership

Ø  Declaration of the Ultimate Beneficial Ownership

Ø  Similarly, Information on Settlor, Trustee(s), protector (if any), beneficiaries (class of beneficiaries), and any other person exercising effective control over the trust (same as for UBOs of the companies/legal entities above)

Yes Yes Yes
Ø  Proof of Incorporation (Certificate, similar evidence of establishment or existence), proof of address.

Ø  Alternatively, attributed registration number and the date of conclusion of the trust fiduciary Agreement for Fiduciary arrangements

Yes Yes
Ø  Articles of Incorporation/association/constitution

Ø  Memorandum

Ø  Alternatively, Deed of trust

Yes Yes
Ø  Proof of address

Ø  No more than 3 months old utility bill or financial statement in the client name which clearly shows the current address

Yes
Source of funds (detailed description of the origin of funds document), could be confirmed by providing the following documents :

Ø  Professional earning (pay slip or taxation e.g.) ;

Ø  Renting income (contract of the lease) ;

Ø  Savings (banking extract) ;

Ø  Inheritance declaration ;

Ø  Product of previous sale of real estate (notarial deed) ;

Ø  Donation (notarial deed or banking extract if manual donation) ;

Ø  Retirement Sheet.

Yes Yes Yes
Resume of the Beneficial Owners including a complete background Yes Yes Yes
Bank Account extract Yes Yes Yes
Register of Directors Yes
Certificate of good standing Yes
Proof of Fiduciary’s status as a professional within the financial sector Yes

Enhanced KYC Procedure

The following is a non-exhaustive list of factors and types of evidence of potentially higher risk:

  1. Customer risk factors: (a) the business relationship is conducted in unusual circumstances; (b) customers that are resident in geographical areas of higher risk as set out in point (3); (c) legal persons or arrangements that are personal asset-holding vehicles; (d) companies that have nominee shareholders or shares in bearer form; (e) businesses that are cash-intensive; (f) the ownership structure of the company appears unusual or excessively complex given the nature of the company’s business;
  2. Product, service, transaction or delivery channel risk factors: (a) private banking; (b) products or transactions that might favour anonymity; (c) non-face-to-face business relationships or transactions, without certain safeguards, such as electronic signatures; (d) payment received from unknown or unassociated third parties; (e) new products and new business practices, including new delivery mechanism, and the use of new or developing technologies for both new and pre-existing products;
  3. Geographical risk factors: (a) without prejudice to Article 9, countries identified by credible sources, such as mutual evaluations, detailed assessment reports or published follow-up reports, as not having effective AML/CFT systems; (b) countries identified by credible sources as having significant levels of corruption or other criminal activity; (c) countries subject to sanctions, embargos or similar measures issued by, for example, the Union or the United Nations; (d) countries providing funding or support for terrorist activities, or that have designated terrorist organisations operating within their country.
KYC Checklist: Individuals Corporate Entities Fiduciary Arrangements/Trusts
Tax Compliance Certificate Yes Yes Yes
Criminal record for individuals and sanctions in case of a legal entity Yes Yes Yes
Statements of intent Yes Yes Yes
Bank statement on AML compliance Yes Yes