I. Introduction

1. In some countries, banks are permitted to use other banks, financial institutions or other entities to perform customer due diligence (CDD). These arrangements can take various forms but in essence usually fall into one of the following two situations:

Reliance on third parties

2. Banks in some countries are allowed to rely on CDD performed by other financial institutions or designated non-financial businesses and professions who are themselves supervised or monitored for AML/CFT purposes. [See Recommendation 17 in the FATF Standards and its interpretative note.] In these situations, the third party will usually have an existing business relationship with the customer, and the banks may be exempt from applying their own CDD measures at the beginning of the relationship. The FATF standards [See Recommendation 17 and Recommendation 10 on CDD in the FATF Standards.] permit reliance for these aspects:

(a) Identifying the customer and verifying that customer's identity using reliable, independent source documents, data or information.

(b) Identifying the beneficial owner, and taking reasonable measures to verify the identity of the beneficial owner, such that the financial institution is satisfied that it knows who the beneficial owner is. For legal persons and arrangements this should include financial institutions understanding the ownership and control structure of the customer.