The Wolfsberg AML Principles

Frequently Asked Questions with Regard to Intermediaries

and Holders of Powers of Attorney / Authorised Signers in the Context of
Private Banking

Questions sometimes arise with regard to Introducing Intermediaries (sometimes referred to as

finders or prospectors), Managing Intermediaries (sometimes referred to as external asset
managers), and holders of powers of attorney/authorised signers, as those terms are used in
paragraphs 1.2.4 and 1.2.5 of the Anti-Money Laundering (AML) Principles for Private Banking. Some of
the questions, as well as the answers are, noted below.

Q.1. What is the role of an Introducing Intermediary?

A. The role of the Introducing Intermediary is limited to introducing a client to the bank. The
Intermediary is not the accountholder, beneficial owner or signatory on the account. For
example, Introducing Intermediaries may include lawyers, accountants, financial advisers, fund
managers and financial institutions. An Introducing Intermediary, as the term is used in these
FAQs, typically has an ongoing professional relationship with the bank that is subject to an
agreement setting out the responsibilities of the bank and the Introducing Intermediary. An
existing client or other person who occasionally refers clients to the bank on an informal basis
would not be considered an Introducing Intermediary for purposes of these FAQs.

Q.2. What due diligence should be undertaken on an Introducing Intermediary?

A. The bank must be satisfied with the Intermediary's reputation and integrity based on publicly
available information and as to such other matters regarding the Introducing Intermediary as it
deems appropriate.

If the Introducing Intermediary is not an institution with a well-known and satisfactory

reputation, then it would be appropriate for the bank to verify the Intermediary's reputation
and integrity.

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 The bank should have a process in place to review and approve Introducing Intermediaries. If
the bank relies on any due diligence conducted by the Intermediary on potential clients, the
bank must be satisfied with the relevant due diligence procedures used by the Intermediary.
Moreover, a record of the checks performed by the bank on the Intermediarys due diligence
procedures should be maintained.

If the Introducing Intermediary also provides a reference for the client, the reference should
document the nature and length of the relationship between the Intermediary and the client.

Q.3. If an Introducing Intermediary refers a client to the bank, what level of due diligence should be
conducted by the bank with respect to the client?

A. Generally, even if an Introducing Intermediary is involved in the relationship, the bank must
obtain the same type of information with respect to the accountholder (or, if different,
beneficial owner) that would otherwise be obtained by the bank, absent such involvement by an
Intermediary. For example, the bank would obtain the requisite information regarding the
accountholders (or beneficial owners) source of wealth, the initial source of funding for the
account and the anticipated account activity. The bank should also follow the guidance set forth
in the Wolfsberg AML Principles for Private Banking and in the FAQs with Regard to Beneficial
Ownership in the Context of Private Banking with respect to establishing identity by reference to
official documents.

However, the bank may, under certain circumstances (see the next paragraph), rely on the
Intermediary to assist in obtaining this information and may obtain copies of official documents
through the Intermediary. Obtaining this type of information and documentation through the
Intermediary could, if the Intermediary has met or will meet with the client, constitute
reasonably sufficient measures that would render it unnecessary for the client to be met by an
employee of the bank before the opening of the account (provided the Intermediary attests to
the accountholders (beneficial owners) identity). See Paragraph 1.3 of the Wolfsberg Principles
for Private Banking.

The bank should consider under what circumstances it may place such reliance on the
Introducing Intermediary.

Q.4. What is the role of a Managing Intermediary?

A. The role of the Managing Intermediary is to manage assets on behalf of one or more clients. In a
typical situation, the Managing Intermediary arranges for the opening of accounts for its clients
with the bank. The bank has a direct account relationship with such clients and typically also has
a direct contractual relationship with the Intermediary setting out the responsibilities of the
bank and the Intermediary regarding due diligence. This type of Intermediary will hereafter be
referred to as a Type 1 Managing Intermediary.

There may also be situations in which the Managing Intermediary becomes the accountholder
with the bank. The Intermediarys clients, in this situation, remain clients of the Intermediary

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 and do not become the clients of the bank and should not somehow be deemed to be clients of
the bank. This type of Intermediary will hereafter be referred to as a Type 2 Managing
Intermediary.

Managing Intermediaries may include lawyers, fund managers, financial advisors or financial
institutions.

Q.5. What due diligence should be undertaken on a Managing Intermediary?

A. The bank should satisfy itself as to the Managing Intermediarys reputation and integrity based
on publicly available information and as to such other matters regarding the Managing
Intermediary as it deems appropriate, including, as appropriate: the nature of the Managing
Intermediarys business and markets; the relationship between the Managing Intermediary and
its clients; the type, purpose and anticipated activity of the account and the nature and duration
of the banks relationship with the Managing Intermediary. The bank should also determine the
jurisdiction in which the Intermediary is located and any applicable regulatory and supervisory
framework including that relating to AML. In addition, in the case of a Type 2 Managing
Intermediary, a bank must determine that the AML due diligence procedures the Intermediary
applies to clients are of an acceptable standard. Generally, a bank is in a position to conclude
that the Type 2 Managing Intermediarys AML procedures are of an acceptable standard if it can
determine, based on the level of regulatory supervision to which the Intermediary is subject and
on the jurisdiction in which it is located, that the Intermediary is itself subject to adequate AML
regulation in the context of its dealings with clients and is supervised for compliance with such
regulation.1

A bank may ascertain (i) whether a Managing Intermediary is subject to AML legislation and
regulation and (ii) whether it has implemented an AML programme designed to comply with
such legislation and regulation, on the basis of (A) the banks familiarity with the reputation of
the Managing Intermediary and/or (B) representations furnished by such Intermediary. For
purposes of clause (A), the Intermediarys membership in a self-regulatory organisation may
provide a basis for, or be taken into account in, concluding that the Intermediarys reputation is
satisfactory. For purposes of clause (B), the representations may be limited to the matters set
forth in clauses (i) and (ii).

Since the situation involving a Type 2 Managing Intermediary is to be distinguished from that of
a Type 1 Managing Intermediary or an Introducing Intermediary, the bank need not obtain client
specific data from such (Type 2) Intermediary, nor undertakings to provide such information,
unless applicable regulation otherwise requires.

However, if a Type 2 Managing Intermediary cannot be determined to be subject to adequate

AML regulation and supervision as set forth above, then the bank should consider and
different banks may develop different approaches in this regard what steps it might take to

1
Such a determination may be based on a banks general risk assessment methodology, which may take into account the
regulatory supervision of Managing Intermediaries in particular jurisdictions and would not necessarily entail discrete inquiries
into the level of regulation of particular Managing Intermediaries on a case-by-case basis.

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 mitigate money laundering risk. Such steps might include (i) considering whether the
Intermediary applies AML client due diligence that is equivalent to that of Managing
Intermediaries subject to AML regulation that is deemed adequate (for example, the
Intermediarys parent is subject to AML regulation and applies global procedures) or (ii)
otherwise satisfying itself as to the adequacy of the Managing Intermediarys AML procedures.
The bank may make appropriate determinations in this regard on the basis of the banks
familiarity with the reputation of the Intermediary and/or on this basis of representations
furnished by such Intermediary.

Q.6. Should the bank conduct due diligence with respect to the Managing Intermediarys clients?

A. The answer differs depending on the role of the Intermediary, the type of account involved, the
jurisdiction in which the Intermediary is located and the regulatory and supervisory framework
to which the Intermediary is subject.

If the Intermediarys client has a direct account relationship with the bank (i.e., the Intermediary
is a Type 1 Managing Intermediary), then the due diligence conducted by the bank with regard
to that client would generally be comparable to that described in the answer to Question 3.

However, if the Intermediary is a Type 2 Managing Intermediary and if the bank can make the
determination as to the adequacy of the applicable AML regulation contemplated by the answer
to the prior question, it should not generally be necessary to conduct client due diligence with
respect to the Intermediarys clients in that the Intermediarys clients in this situation should
generally not be viewed as the banks clients.2 However, if the determination referred to above
cannot be made, the bank should consider whether to conduct due diligence on an
Intermediarys clients.

The cases below may be representative of situations faced by a financial institution concerning
an Intermediary that is the accountholder with the bank (i.e., the Type 2 Managing Intermediary
situation).

Case # 1: The Intermediary is a financial institution subject to similar AML laws, due
diligence standards and regulatory supervision as the bank. In such a case, it would generally not
be necessary for a bank to perform due diligence on the Intermediary's clients.

Case # 2: The Intermediary is a financial institution that is not regulated and not subject
to AML legislation. The bank would not generally be able to make the determination referred to

2
The mere fact that there is a notional connection between the funds a client entrusts with a Type 2 Managing Intermediary
and transactions that the Intermediary enters into with the bank, should not, from the banks perspective, somehow result in
the Intermediarys clients being treated as the clients of the bank; it is the Intermediary that should be viewed as the client of
the bank, and the banks know you client obligation accordingly extends only to the Intermediary. In keeping with this
principle, it would be inappropriate to view the bank as having an obligation, albeit one that may be delegated, to conduct
client due diligence with regard to the intermediarys clients, because, as noted, the Intermediarys clients are not to be viewed
as clients of the bank, and because, by definition, the obligation to conduct client due diligence extends only to clients, not to
clients of clients. Consequently, the bank should not be viewed as relying on the Intermediary to conduct due diligence on
the Intermediarys clients, given that the bank has no underlying obligation to conduct such due diligence and that reliance, in
a strict sense, presupposes such an underlying obligation.

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 above unless it determines that the Intermediary is of good reputation and has satisfactory
client due diligence procedures (e.g. it is based in a non-FATF country but is part of a Group that
applies acceptable global AML control policies and procedures). If the bank is not able to make
this determination, then the bank should perform its own due diligence on the underlying
clients.

Case #3: The Intermediary is a financial institution that is not regulated and not subject
to AML legislation. The bank determines that the Intermediary is of good reputation and has
satisfactory client due diligence procedures. However, regulation applicable to the bank
requires the bank to conduct due diligence with respect to the Intermediarys clients. The bank
may rely on the Intermediary to assist in obtaining relevant due diligence information with
regard to the Intermediarys clients.

Q.7. How is a holder of a power of attorney or an authorised signer (Authorised Signer) different
from a Managing Intermediary?

A. An Authorised Signer has signatory authority over an account but does not act on a professional
basis as a manager of funds (see Question 4). The Authorised Signer is neither the accountholder
nor the beneficial owner of an account. Authorised Signers may include lawyers, accountants,
family members, or friends (i) of the accountholder or, if different, (ii) of the beneficial owner of
the account. The beneficial owner of an account may also be an Authorised Signer.

Q.8. What due diligence should be undertaken on an Authorised Signer?

A. It is not usual to perform client due diligence on an Authorised Signer. Nevertheless, the
relationship between the Authorised Signer, the accountholder and, if different, the beneficial
owner, of the account must be understood.

The nature of the relationship between the accountholder and beneficial owner of the account
and the Authorised Signer may require the private banker to conduct further due diligence on
the Authorised Signer. For example, if the relationship between the Authorised Signer and the
accountholder or beneficial owner is not evident, further information should be obtained from
the Authorised Signer concerning the relationship. If the Authorised Signer's response to the
private banker's questions concerning the relationship between the Authorised Signer and the
accountholder or, if different, the beneficial owner, is not satisfactory, then the account should
not be opened.

The private banker must obtain the necessary documentation establishing the Authorised
Signer's authority to act on behalf of the accountholder or beneficial owner (e.g. the Power of
Attorney).

The due diligence performed on the accountholder and, if different, the beneficial owner, is the
same as it would be in the situation where there is no Authorised Signer. In this regard, the
situation is generally the same as that discussed in the response to Question 3.

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