One of the obligations supervised entities have under AML law, refers to ongoing measures of vigilance around clients which are applied according to a risk-based approach (RBA). These measures of vigilance are applied, not only in the beginning of business relationship, but also during the course of the business relationship.
The RBA states that an assessment must be done prior to the acceptance of the client in order to assign a rating, and that this rating is adjusted later during the ongoing monitoring of the client, further to the evolution of the relationship and the transactions.
When applying the RBA, different factors are considered such as: origin of the relationship, type of services provided (i.e. provision of registered office, management services, administrative services…), knowledge of the client (including origin of the financing of the structure), knowledge of the UBOs as well as of any external managers appointed.
While certain criteria included in the RBA are well known, we have noticed lately that the country of fiscal residence of the UBOs can not only have a negative impact on the final assessment of the potential client but can also prevent bank account opening.
It is important to notice that this is not a general approach adopted by all banks in the Luxembourg market and, although the door seems to be closed for certain jurisdictions with some banks, the door remains open for the same jurisdictions with other banks. We maintain a continuous dialogue with banks and try to find the appropriate documents/information to not only mitigate risks raised, but also to find the banks that will accept clients coming from such jurisdictions.