Identity Policy

Organisations are required to identify and verify the entities relevant to each relationship, these will include the Customer, their Controlling Parties (including Beneficial Owners) and any Introducers. The extent of identification and verification is not prescribed by the regulator's guidance and is left to the "reasoned judgements" of each organisation.

The regulator's guidance also requires that the persons related to a relationship which has been assessed as "Higher Risk" should undergo ECDD and therefore more stringent identification and verification should take place.

Identity Policies give organisations somewhere to define which components of an entity's identity information should be identified and verified depending on the entity's context within the relationship.

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Example of an Identity Policy

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Every organisation has one Identity Policy form.

There are four sections of the Identity policy, each representing the one of the four types of entity within Proofdesk:

• Natural Person

• Legal Person

• Legal Arrangement

• Foundation

Each section lists the identity components that are relevant to that entity type. e.g: the Natural Person section includes Date of Birth, whereas Legal Person section includes Incorporation Date instead.

Within each section, there are four columns representing different contexts that an entity might be found in:

• Customer
• Linked Entity
• Beneficial Owner

• Introducer

Beside each identity component the organisation can state whether it needs to be identified or verified under CDD (Colour coded blue) and ECDD (Colour coded Red).

"Following ML/FT risk assessments, whether at the point of an initial risk assessment or after a review, relevant persons must determine and adopt appropriate and effective risk sensitive procedures and controls which enable them to manage and mitigate their ML/FT risks. This means that heightened (or in the case of CDD, enhanced) measures should be taken to manage and mitigate situations in which the ML/FT risk is higher and Code concessions must not be applied. Less stringent measures may be applied in situations with lower ML/FT risk."

The Handbook 2023 Section 2.2.5

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Relevant Legislation/Guidance

The Code 2019 - 4 Procedures and controls

(1) A relevant person must not enter into or carry on a business relationship, or carry out an occasional transaction, with or for a customer or another person unless the relevant person —

(a) establishes, records, operates and maintains procedures and controls —

(i) in order to comply with each paragraph within Parts 3 to 9;

(ii) in relation to determining whether a customer, any beneficial owner, beneficiary, introducer or eligible introducer is included on the sanctions list; and

(iii) in relation to internal controls and communication matters that are appropriate for the purposes of forestalling and preventing ML/FT;

(b) takes appropriate measures for the purpose of making its employees and workers aware of —

(i) the AML/CFT legislation; and

(ii) the procedures and controls established, recorded, maintained and operated under head (a).

(2) The procedures and controls referred to in sub-paragraph (1) must —

(a) have regard to the materiality and risk of ML/FT including whether a customer, beneficial owner, beneficiary, introducer or eligible introducer poses a higher risk of ML/FT;

(b) enable the relevant person to manage and mitigate the risks of ML/FT that have been identified by the relevant person when carrying out the requirements of this Code; and

(c) be approved by the senior management of the relevant person.

(3) The ultimate responsibility for ensuring compliance with this Code is that of the relevant person, regardless of any outsourcing or reliance on third parties during the process.

Also refer to The Handbook 2023 section 2.1 through 2.2