Guidelines for wealth management

EBA has published the final Guidelines under Articles 17 and 18(4) of Directive (EU) 2015/849 on simplified and enhanced customer due diligence. The Risk Factors guidelines give an overview on the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risk associated with individual business relationships and occasional transactions.

Guidelines for wealth management

143. Wealth management is the provision of banking and other financial services to high-net- worth individuals and their families or businesses. It is also known as private banking. Clients of wealth management firms can expect dedicated relationship management staff to provide tailored services covering, for example, banking (e.g. current accounts, mortgages and foreign exchange), investment management and advice, fiduciary services, safe custody, insurance, family office services, tax and estate planning and associated facilities, including legal support.

144. Many of the features typically associated with wealth management, such as wealthy and influential clients; very high-value transactions and portfolios; complex products and services, including tailored investment products; and an expectation of confidentiality and discretion are indicative of a higher risk for money laundering relative to those typically present in retail banking. Wealth management firms’ services may be particularly vulnerable to abuse by clients who wish to conceal the origins of their funds or, for example, evade tax in their home jurisdiction.

145. Firms in this sector should consider the following risk factors and measures alongside those set out in Title II of these guidelines. The sectoral guidelines in Title III, Chapters 2, 7 and 9, may also be relevant in this context.

Guidelines for wealth management – Risk factors

Product, service and transaction risk factors

146. The following factors may contribute to increasing risk:

• customers requesting large amounts of cash or other physical stores of value such as precious metals;
• very high-value transactions;
• financial arrangements involving jurisdictions associated with higher ML/TF risk (firms should pay particular attention to countries that have a culture of banking secrecy or that do not comply with international tax transparency standards);
• lending (including mortgages) secured against the value of assets in other jurisdictions, particularly countries where it is difficult to ascertain whether the customer has legitimate title to the collateral, or where the identities of parties guaranteeing the loan are hard to verify;
• the use of complex business structures such as trusts and private investment vehicles, particularly where the identity of the ultimate beneficial owner may be unclear;

• business taking place across multiple countries, particularly where it involves multiple providers of financial services;

• cross-border arrangements where assets are deposited or managed in another financial institution, either of the same financial group or outside of the group, particularly where the other financial institution is based in a jurisdiction associated with higher ML/TF risk. Firms should pay particular attention to jurisdictions with higher levels of predicate offences, a weak AML/CFT regime or weak tax transparency standards.

Guidelines for wealth management – Customer risk factors

147.

The following factors may contribute to increasing risk:

• Customers with income and/or wealth from high-risk sectors such as arms, the extractive industries, construction, gambling or private military contractors.
• Customers about whom credible allegations of wrongdoing have been made.
• Customers who expect unusually high levels of confidentiality or discretion.
• Customers whose spending or transactional behaviour makes it difficult to establish ‘normal’, or expected patterns of behaviour.
• Very wealthy and influential clients, including customers with a high public profile, non-resident customers and PEPs. Where a customer or a customer’s beneficial owner is a PEP, firms must always apply EDD in line with Articles 18 to 22 of Directive (EU) 2015/849.
• The customer requests that the firm facilitates the customer being provided with a product or service by a third party without a clear business or economic rationale.

Guidelines for wealth management – Country or geographical risk factors

148. The following factors may contribute to increasing risk:

• Business is conducted in countries that have a culture of banking secrecy or do not comply with international tax transparency standards.
• The customer lives in, or their funds derive from activity in, a jurisdiction associated with higher ML/TF risk.

Guidelines for wealth management – Measures

149. The staff member managing a wealth management firm’s relationship with a customer (the relationship manager) should play a key role in assessing risk. The relationship manager’s close contact with the customer will facilitate the collection of information that allows a fuller picture of the purpose and nature of the customer’s business to be formed (e.g. an understanding of the client’s source of wealth, why complex or unusual arrangements may nonetheless be genuine and legitimate, or why extra security may be appropriate). This close contact may, however, also lead to conflicts of interest if the relationship manager becomes too close to the customer, to the detriment of the firm’s efforts to manage the risk of financial crime. Consequently, independent oversight of risk assessment will also be appropriate, provided by, for example, the compliance department and senior management.

      

     Guidelines for wealth management – Enhanced customer due diligence  

     150. The following EDD measures may be appropriate in high-risk situations:  

     • Obtaining and verifying more information about clients than in standard risk situations and reviewing and updating this information both on a regular basis and when prompted by material changes to a client’s profile. Firms should perform reviews on a risk-sensitive basis, reviewing higher risk clients at least annually but more frequently if risk dictates. These procedures may include those for recording any visits to clients’ premises, whether at their home or business, including any changes to client profile or other information that may affect risk assessment that these visits prompt.

     • Establishing the source of wealth and funds; where the risk is particularly high and/or where the firm has doubts about the legitimate origin of the funds, verifying the source of wealth and funds may be the only adequate risk mitigation tool. The source of funds or wealth can be verified, by reference to, inter alia:  

     i. an original or certified copy of a recent pay slip;

     ii. written confirmation of annual salary signed by an employer;

     iii. an original or certified copy of contract of sale of, for example, investments or a company;

     iv. written confirmation of sale signed by an advocate or solicitor;

     v. an original or certified copy of a will or grant of probate;

     vi. written confirmation of inheritance signed by an advocate, solicitor, trustee or executor;

     vii. an internet search of a company registry to confirm the sale of a company.

     • Establishing the destination of funds.

     • Performing greater levels of scrutiny and due diligence on business relationships than would be typical in mainstream financial service provision, such as in retail banking or investment management.

Carrying out an independent internal review and, where appropriate, seeking senior management approval of new clients and existing clients on a risk-sensitive basis.

• Monitoring transactions on an ongoing basis, including, where necessary, reviewing each transaction as it occurs, to detect unusual or suspicious activity. This may include measures to determine whether any of the following are out of line with the business risk profile:

transfers (of cash, investments or other assets);

the use of wire transfers;

significant changes in activity;

transactions involving jurisdictions associated with higher ML/TF risk.

Monitoring measures may include the use of thresholds, and an appropriate review process by which unusual behaviours are promptly reviewed by relationship management staff or (at certain thresholds) the compliance functions or senior management.

• Monitoring public reports or other sources of intelligence to identify information that relates to clients or to their known associates, businesses to which they are connected, potential corporate acquisition targets or third party beneficiaries to whom the client makes payments.
• Ensuring that cash or other physical stores of value (e.g. travellers’ cheques) are handled only at bank counters, and never by relationship managers.
• Ensuring that the firm is satisfied that a client’s use of complex business structures such as trusts and private investment vehicles is for legitimate and genuine purposes, and that the identity of the ultimate beneficial owner is understood.

Compliance & Geldwäschebeauftragter – Guidelines for wealth management

Unsere Praxisseminare Geldwäsche und Fraud – Basisseminar, Geldwäsche und Fraud – Aufbauseminar, Geldwäsche & Fraud – Update und Geldwäsche & Fraud – Forum verschaffen Ihnen einen umfassenden Überblick zu den aktuellen gesetzlichen Neuerungen und unterstützen Sie dabei, Geldwäsche- und Betrugsstrukturen zu erkennen, zu bewerten und rechtzeitig zu verhindern. In den Compliance-Seminaren wie Compliance, Compliance für Vertriebsbeauftragte, Neue Compliance-Funktion gemäß MaRisk oder auch Compliance im Fokus der Bankenaufsicht werden Ihnen die Ausgestaltung der Schnittstellen zwischen Compliance, Datenschutz, IT, Zentrale Stelle und Interner Revision näher gebracht. Auch die Mindestanforderungen zum Aufbau eines Gesamt-IKS werden hier beispielsweise näher erläutert.

Zudem haben Sie die Chance, nach Teilnahme der Seminare die Zertifizierungslehrgänge zum Compliance Officer, zum AML & Fraud Officer oder zum Geldwäsche-Beauftragter zu absolvieren.