FATF Recommendation 10

Introduction to Recommendation 10

FATF Recommendation 10 sets out essential customer due diligence measures to prevent money laundering and terrorist financing.

It applies to all financial institutions and professions subject to it.

Step 1: Customer Identification

Request the following documents including: identity card, passport, trade register for companies.

(Collect and verify the customer's identity using reliable and independent documents, data or information)

Step 2: Identification of the beneficial owner

• Identify the beneficial owner(s) and take reasonable steps to verify their identity.

• For a company: identify the partners holding more than 25% of the capital or controlling it.

Step 3: Understanding the purpose and nature of the relationship

• Financial institutions and other subject entities must identify, analyze and document the reasons why a customer establishes a business relationship with them, as well as the nature of the activities expected during this relationship.

• Example: Professional current account for local commercial activity.

Step 4: Exercise constant vigilance

• Continuously monitor business relationships with their customers to detect unusual or suspicious activity throughout the relationship.

• Keep customer data up to date (identity, economic activity, beneficial owners).

Step 5: Apply enhanced measures for certain transactions

• Implement additional controls to monitor, analyze and validate transactions presenting a high risk of money laundering or terrorist financing.

• These measures should be applied in a targeted manner for transactions deemed atypical, complex or linked to high-risk clients, sectors or jurisdictions.

Step 6: Time for checks

• Collect identity documents (individuals) or legal statuses (companies), verify the origin of funds for relationships involving significant amounts, etc.

• Checks should be carried out at key points in the lifecycle of the business relationship and transactions to ensure appropriate due diligence and prevent money laundering and terrorist financing risks.

Step 7: Risk-based approach

• Allocate resources effectively based on identified risks: strengthen control measures for high-risk customers, reduce controls for low risks while respecting minimum regulatory requirements.

• Identify, assess and manage the risks of money laundering and terrorist financing according to their level of seriousness and then apply proportionate due diligence measures.

Step 8: Managing existing customers

• Requires ongoing vigilance to ensure that information about these customers remains up to date and compliant with regulatory requirements.

• The information collected when entering into a relationship (identity, supporting documents, activity, beneficial owners) must be regularly reviewed to ensure that it is accurate and up to date.

Step 9: Summary and key points

Although the FATF provides a general framework through Recommendation 10, its implementation may vary depending on the national legislative and regulatory framework, economic particularities or even risk typologies.

This flexibility, while essential, can also be complex to manage. This is why it is crucial to be well supported to ensure the compliance of your activities, avoid the risk of sanctions and strengthen the transparency of your operations.

We are here to guide you!