Newsflash: Know Your Customer in terms of the Financial Intelligence Act, 2019.

What is customer due diligence??

In terms of the Financial Intelligence Act, 2019 (FIA Act) “Customer due diligence means the process where relevant information about the customer is collected and evaluated for any potential risk of commission of a financial offence.”?This includes obtaining information about who the customer is through Know Your Customer (KYC) forms, independent verification of?this information, conducting a risk assessment on the customer and ensuring all information in respect of the customer is kept up to date. Upon the completion of a customer due diligence process, the customer's risk rating in respect of money laundering, terrorist finance and proliferation is categorised and this rating will determine if any further information is required from the customer.?

Who is responsible for conducting customer due diligence?

In terms of Section 14 of the FIA Act, a specified party or accountable institution shall conduct customer due diligence when:-?

• when establishing a business relationship or concluding a transaction with a customer;?
• when carrying out a transaction in excess of P10?000.00 on behalf or on the instruction of a customer or any person, whether conducted as a single transaction or several transactions that appear to be linked;
• when carrying out a domestic or international wire transfer;
• when there is doubt about the veracity of previously obtained customer identification and data; and
• where there is suspicion of a financial offence?

Specified institutions are listed in Schedule 1 of the FIA Act and include, but are not limited to, an attorney, an accountant and a bank.?An accountable institution is any legal entity incorporated or registered under any law. This means every company or registered entity is required to conduct customer due diligence in accordance with the FIA Act.?

A specified party or accountable institution who fails to conduct customer due diligence shall be liable to a fine of?BWP1 000 000.

For purposes of KYC a specified or accountable institution is required before conducting a business relationship or carrying out a transaction to:-

• establish and verify the identity of a customer, unless the identity of that customer is known and has been verified by the specified party;
• establish and verify the identity of the beneficial owner;
• collect information to enable understanding of the anticipated?purpose and intended nature of the business relationship or transaction; and
• obtain approval of senior management where the business relationship or transaction is established in a high-risk jurisdiction or involves a high-risk business.?

Where the customer is acting on behalf of another person, the specified party or accountable institution shall establish:-?

• the identity of the person on whose behalf the customer is acting;?
• and verify the customer’s authority to establish the business relationship or to conclude the transaction on behalf of that other?person; and
• verify the other person’s identity on the basis of documents or information obtained from a reliable source which is independent of both the customer and the person on whose behalf the customer is acting

For purposes of section 16 of the FIA Act, the proof of the identity of the customer shall be through:-

• production of a National Identity Card for citizens;
• production of a passport for non-citizens;?
• in relation to a company —

- a certificate of incorporation or a certificate of registration,

- trading licence, and??

- ownership and control structure and directors;?

• a deed of trust; or?
• such other identity document as the Minister may prescribe from time to time.

Where a specified party had previously established a business relationship with a customer before the coming into force of the FIA Act, the specified party or accountable institution shall apply the customer due diligence measures on that customer.

A?person?who?transacts?business?with?a?specified?party?or?accountable institution using false identification documents commits an?offence and is liable to a fine not exceeding P500 000 or to imprisonment?for a term not exceeding 10 years or to both. A?specified?party?or?accountable?institution?that?fails to verify the identity of a customer?shall?be?liable?to?a fine?not?exceeding?BWP1?000 000 as may be imposed by the supervisory authority.

Though Botswana has made real progress in strengthening its AML/CFT framework, the obligation lies with all registered and incorporated entities to do their part.?

For all your compliance, policy, training, AML and KYC needs please feel free to contact us at [email protected] or +267 3975779.

The information contained in this newsflash was intended for our clients and correct to the best of the authors knowledge at the time of publication. Before making any decision or taking any action, you should consult the contacts listed here.