apply – when must identification take place?
127. Article 40 para. 1 BWG determines the cases in which the identity of a customer must be ascertained and verified.
7.1. Establishment of a permanent business relationship (Article 40 para. 1 no. 1 BWG)
128. Prior to a permanent business relationship being established, the identity of any person(s) who will become a contractual partner of the supervised company due to such establishment must be ascertained and verified (Article 40 para. 1 no. 1 BWG). This means
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that the process of ascertaining and verifying the identity must have been completed by the time of the agreement being concluded, such as the acceptance of an application to open an account by the supervised company. A preliminary contract discussion for information purposes does not trigger any identification obligation at this stage. Any information received at this stage, however, can be kept on file with a view to a potential business relationship.
129. A permanent business relationship exists for example upon:
the opening of a giro account;
the opening of a savings account;
the opening of a securities account;
the opening of a loan account;
the provision of safe deposit box services.130. Pursuant to Article 40 para. 2c BWG, by way of derogation from Article 40 paras. 1, 2 and 2a BWG, the opening of a bank account is permissible provided that there are adequate safeguards in place to ensure that transactions are not carried out by the customer or on the customer’s behalf until full compliance with Article 40 paras. 1, 2 and 2a BWG has been attained. This applies correspondingly to any establishment of a permanent business relationship.
131. Supervised companies may therefore avail themselves of the provisions of Article 40 para. 2c BWG and conclude banking transactions subject to this condition precedent, and set up the account or establish the permanent business relationship even if the identification obligations have yet to be met (in full). In such a case they must have ensured however that the account is blocked for all transactions until such time as the condition of all of the provisions set out in Article 40 paras. 1, 2 and 2a BWG being fulfilled has been met. It is therefore also not permitted for deposits for the account to be accepted prior to this condition being met.
132. In order to fulfil the statutory rules on identification in the best way possible, use should only be made of this provision in exceptional cases.
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7.2. Execution of individual transactions exceeding the limit amount (Article 40 para. 1 no. 2 BWG)
133. The identity of the customer must be ascertained and verified before executing any transactions which are not conducted in connection with a permanent business relationship and which involve an amount of at least €15,000 or an equivalent value. Individual transactions of this type are one-off banking transactions with no follow-up transactions.
Examples include the purchase and sale of foreign currency, the discounting of bills of exchange or cheques, financial transfers and the payment of cash into a third party account.
Reference is made to the special identification obligations set out in Regulation (EC) 1781/2006.48
134. In the case of individual transactions, the obligation to identify the client generally only applies from an amount of €15,000 upwards. However, if several individual transactions are obviously linked to one another and the total amount of all of these transactions is in excess of the €15,000 threshold, the client must also be identified.
135. Individual transactions that are effected in close succession are deemed to be linked to one another if they could have been processed as one single transaction but - for whatsoever reason - were split into smaller separate transactions.
136. Should it subsequently emerge that the amounts of several individual transactions that are apparently linked to one another total or exceed the amount of €15,000, identification must be carried out as soon as it has been established that the amount of €15,000 has been reached or exceeded. This process may be in response to an order to execute a follow-up transaction or may have nothing to do with any subsequent transaction but result from an ex-post monitoring process with regard to completed transactions. In order to fulfil the legal obligations it will be necessary – as far as possible – in the event of the latter to find the client responsible for the transactions and ask him to provide identification. All steps taken for this purpose should be documented.
48 Regulation (EC) No. 1781/2006 of 15 November 2006 on information on the payer accompanying transfers of funds (Official Journal 2006 L 345/1). For details, also refer to the FMA Circular on the Transmission of Payer Information, as last amended.
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7.3. Suspicion of money laundering or terrorist financing activity (Article 40 para. 1 no. 3 BWG)
137. If it is suspected or if there are reasonable grounds to suspect that a customer:49
belongs to a terrorist organisation as defined in Article 278b of the Strafgesetzbuch (StGB; Penal Code);
objectively participates in transactions that serve the purpose of money laundering (Article 165 StGB50); or
objectively participates in transactions which serve the purpose of terrorist financing as defined in Article 278d StGB,the identity of the customer must be ascertained and verified irrespective of the amount involved in the transaction or the type of agreement concluded, and further appropriate due diligence measures should be applied on a risk-sensitive basis.
138. Given that merely objective participation in the named transactions is all that is required, the customer does not have to know and may not even seriously believe it to be possible that the transaction in which he participates is serving the purposes of money laundering or terrorist financing. It is sufficient for the supervised company to suspect or to have reasonable grounds to suspect that the transaction is actually serving such purposes.
Correspondingly, it is enough for the supervised company to suspect or have justified grounds to suspect that the customer’s transaction meets the physical elements of the offence provided by Article 165 StGB or the physical elements of the offence as provided under Article 278d StGB. The mental elements of the offence (intent or knowledge) need not be fulfilled and therefore do not require to be verified by the supervised company. Customers who are exploited by third parties – generally beneficial owners – without any intent on their part should therefore be identified in accordance with Article 40 para. 1 no. 3 BWG.
139. Customers as defined in Article 40 para. 1 no. 3 BWG include both customers that place an order for an individual transaction and those customers who are in a permanent
49 With regard to the conditions under which a supervised company should be suspicious or is entitled to see grounds for suspicion, please refer to the FMA Circular on Suspicious Transaction Reports, as last amended.
50 It should be noted that Article 165 StGB now directly criminalises self-laundering.
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business relationship with the supervised company or wish to enter into such a relationship.
Furthermore, the term of customer as provided by Article 40 para. 1 no. 3 BWG also covers authorised representatives.
140. With regard to customers who are in a permanent business relationship with the supervised company, the latter must already hold information on their identity. If doubts as to the customer’s identity arise due to suspicions, the information on the customer’s identity – the provisions of Article 40 para. 2e BWG notwithstanding – must be obtained again and any missing information on the customer’s identity added, and the obtained information (possibly in combination with existing information) must be subject to a renewed review.
141. In all cases – in the event of doubts as to the information provided on the customer’s identity – the information received should be confirmed by requesting further documents, data and information from a credible and independent source and used to verify the customer’s identity.
142. Article 40 para. 1 BWG only makes provision for an identification obligation in the event of suspicious cases. However, this provision has to be read in conjunction with Article 40b para. 1 BWG, according to which supervised companies, in situations which by their nature can present a higher risk of money laundering or terrorist financing, must apply additional due diligence measures in addition to the obligations pursuant to Article 40 paras.
1, 2, 2a and 2e on a risk-sensitive basis. The existence of suspicions of money laundering or terrorist financing is a case governed by Article 40b para. 1 BWG in which additional due diligence measures are required.
143. In the event of a suspicion or reasonable grounds for suspicion, the supervised company must inform the Financial Intelligence Unit51 of its suspicion in accordance with Article 41 para. 1 BWG.
51 The Financial Intelligence Unit referred to here and below is the authority as defined in Article 41 para. 1 BWG. For further details on contacting the Financial Intelligence Unit and on the form and content of a suspicious transaction report, refer to the FMA Circular on Suspicious Transaction Reports, as last amended.
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7.4. Deposits into or withdrawals from savings accounts that exceed the limit amount (Article 40 para. 1 no. 4 BWG)
144. Upon each deposit into and withdrawal from a savings account, the identity of the holder of the savings account and – where applicable – the identity of the authorised representative carrying out the transaction must be ascertained if the amount deposited or withdrawn is at least €15,000 or an equivalent value (for further details in this regard see Chapter 8, paras. 152 and 153).
7.5. Questions of doubt regarding the identity data obtained (Article 40 para. 1 no. 5 BWG)
145. If an employee of the supervised company has doubts as to the authenticity and adequacy of previously obtained identity data, a new or additional identification of the persons in question must be carried out with regard to these areas of doubt (customer, authorised representative, trustor or beneficial owner).
146. Where there are doubts as to the authenticity of the identity documents, further documents, data and information should be requested from a credible and independent source and used to verify the identity.
147. If the doubts are not eliminated as a result of the new or additional identification, further appropriate due diligence measures are to be taken pursuant to Article 40b para. 1 BWG and – upon the suspicion or reasonable grounds for suspicion that a business relationship or transaction is being used for the purposes of money laundering or terrorist financing or that the customer belongs to a terrorist organisation – the reporting requirement set out under Article 41 para. 1 BWG must be fulfilled. If the supervised company is not in a position to fulfil its identification obligations, the consequences as detailed in Article 40 para. 2d BWG must be taken.
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7.6. Consequences in cases where identification is impossible
148. In the event that the supervised company is not in a position to meet the identification obligations defined in Article 40 paras. 1, 2 and 2a BWG, provision is made in Article 40 para. 2d BWG to the effect that no business relationship may be established respectively the requested transaction may not be carried out. Any existing business relationship is similarly to be terminated. Moreover, if the discussions held or the identification process leads to the suspicion or reasonable grounds for suspicion that a business relationship or transaction is designed to serve the purposes of money laundering or terrorist financing or that the customer belongs to a terrorist organisation, a suspicious transaction report must be made to the Financial Intelligence Unit.