A Guide: Banking

Certifying documents

In the event that you are unable to visit the bank in person, and therefore unable to provide original documents to the bank clerk dealing with your application, documents provided must be certified. The certification is usually required to state that the copy you are presenting is a true and certified copy of the original document and in the case of identification, that it is both a true certified copy and true likeness of the original. You would then need an appropriate official certifier. There are various professions and individuals who are permitted to certify documents, such as:

  • Police official
  • Lawyer
  • Accountant
  • Banker
  • JOP (Justice of the Peace) / Magistrate

What is money laundering?

Money laundering is the term used to describe the handling or aiding of the handling of assets, knowing they are the result of a serious crime, such as terrorism or illegal drug activities. Other definitions include the procedure to conceal the origins of proceeds from criminal activity so that they appear to have originated from legitimate sources.

There are a vast amount of illegal activities which generate large sums of money, amongst others; financial crimes, terrorism, sale of illegal arms, smuggling, organised crime such as trafficking or prostitution, embezzlement, insider trading, bribery, ransom, illegal adoption and internet or computer fraud.

Banks are obliged to disclose suspicious activities, and to introduce the relevant internal controls and staff training to prevent money laundering from taking place. Money-laundering legislation requires banks to put in place effective procedures to ensure that all persons conducting business with them are properly identified, and that transactions which do not appear to be legitimate are reported.

Regulated and licensed financial institutions are under a regulatory obligation to adhere to the AML/CFT Guidance Notes which can be found at http://www.gfsc.gi/amlgn. Persons not adhering to these guidelines, or aiding money-laundering activities may be subject to criminal charges and/or imprisonment.

It is a common misconception that money laundering explicitly involves large sums of money - this is not the case. Illicit activity also takes the form of small bank accounts or small amounts, in order to avoid detection. Criminals may try to use the identities of innocent individuals or companies to set up accounts. For this reason, banks are required to take appropriate and up to date due diligence documentation (proof of address and Identification).

Under the Crime (Money Laundering and Proceeds) Act 2007, Terrorism (Amendment) Act 2007 and Drug Trafficking Offences Act (1995), there are a number of requirements that banks must satisfy before opening an account for an individual, company, club/society or trust. These laws not only place a legal responsibility on the banks but also on the individual employees, and carry a possible prison sentence if this responsibility is not carried out properly.

Money laundering and combating terrorism

Following the occurrences of September 11th in New York, 11th March in Madrid and 7th July in London, terrorism has obtained substantial publicity and we are now all too well aware of the implications of allowing terrorist groups to become richer and more powerful. One way to reduce these types of activities is to restrict their financial movements and make it the responsibility of all financial institutions to screen transactions and adhere to the principles of the AML/CFT Guidance Notes.

These Guidance Notes (the Notes) represent a major step forward in the approach taken by the FSC in setting out the requirements in respect of systems of controls that firms need to have in place in order to prevent the mis-use of the financial services sector for criminal activity. The Notes are backed up by the Terrorism (Amendment) Act 2007.

These Notes reflect the revised 40+9 FATF recommendations as well as the provisions of the 3rd Money Laundering Directive as they affect the regulated financial sector for which the FSC has responsibilities. These notes also give effects to two implementing measures published by the EU since the Directive was published on Politically Exposed Persons, Reduced Due Diligence Measures and Information accompanying fund transfers.

The risk of terrorist financing entering the financial system can be reduced if institutions apply anti-money laundering systems of control, particularly in respect of Know Your Customer procedures and source of funds verification.

Banks are required to report to the Police where it knows or suspects that a person is, or has been, a customer of that institution or with whom the institution has had dealings with is a terrorist, or a person who receives funds in relation to terrorism or makes funds available for terrorism.

Opening a bank account: Why does a bank ask for so much paper work?

A bank is under a legal obligation to obtain sufficient proof of your identity and hold this, together with all the relevant information, on your customer file. A customer must have a legitimate, legal interest in doing business with a bank and therefore these should be no reason to withhold information. The bank has to be aware of your intentions of business and what type of transactions it should expect. The bank has to ensure that the person opening the account is a real person and is not impersonating someone else or providing a false name or address and therefore requests proof of the individual’s identity and address.

What is acceptable as proof of ID / address?

When a bank asks for ‘Due Diligence’, what this refers to is proof of address, proof of Identification and/or source of funds. This along with information gathered at the application stage paints a picture of the customer’s lifestyle, known to bankers as ‘Know Your Customer’ most commonly referred to as ‘KYC’. Without KYC, banks can become involved with elicit activities and therefore subject to reputational, operational and legal risks, which can result in significant financial cost, or eventual winding up of the institution. KYC is most closely associated with the fight against money-laundering. Sound KYC policies and procedures are critical in protecting the safety and soundness of banks and the integrity of banking systems.

It is therefore the legal responsibility of the bank to ensure that their customers are who they say they are and that the bank carries out a screening process at the time of application. You should therefore expect the bank to ask you for original versions of your documentation, of which a copy will be taken and certified for their records, along with a considerable amount of questions in the application form.

Banks are also required to review and update the documentation they have about customers at regular intervals. If you have received a letter requesting documentation, you need not be alarmed, these are sent out in bulk in order to update the bank’s records.

Types of proof of address may be:

  • utility bills;
  • ID card (which also contains the individuals address );
  • credit card bills;
  • bank statements;
  • tax bills Original lease or rental agreement with your name listed as the lessee or renter.

Types of proof of identification may be:

  • passport with recognizable photograph;
  • National ID cards;
  • Valid driving licence with photograph.

Data protection

The Data Protection Act 2004 provides that institutions are prohibited from disclosing any personal information about a customer to any third party without the explicit permission of the customer. It also provides that all information collected must be relevant and useful for the application and not simply asking questions for the sake of asking questions.

It is therefore safe to assume that by providing your personal details to the bank, these will be kept and collected for the purposes of your bank account and will not be used for anything else.

The following link may be useful for further Data Protection information: http://www.gra.gi/index