Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual

Private Banking Due Diligence Program (Non-U.S. Persons) — Overview

Ascertaining Source of Funds and Monitoring Account Activity Banks that provide private banking services generally obtain considerable information about their clients, including the purpose for which the customer establishes the private banking account. This information can establish a baseline for account activity that enables a bank to better detect suspicious activity and to assess situations where additional verification regarding the source of funds may be necessary. Banks are not expected, in the ordinary course of business, to verify the source of every deposit placed into every private banking account. However, banks should monitor deposits and transactions as necessary to ensure that activity is consistent with information that the bank has received about the client’s source of funds and with the stated purpose and expected use of the account. Such monitoring facilitates the identification of accounts that warrant additional scrutiny. Enhanced Scrutiny of Private Banking Accounts for Senior Foreign Political Figures For the purposes of private banking accounts under 31 CFR 1010.605(p), the regulation defines the term “senior foreign political figure” to include one or more of the following: • A current or former: – Senior official in the executive, legislative, administrative, military, or judicial branches of a foreign government (whether elected or not). – Senior official of a major foreign political party. – Senior executive of a foreign-government-owned commercial enterprise. 133 • A corporation, business, or other entity that has been formed by, or for the benefit of, any such individual. • An immediate family member (including spouses, parents, siblings, children, and a spouse’s parents and siblings) of any such individual. • A person who is widely and publicly known (or is actually known by the relevant bank) to be a close associate of such individual. Senior foreign political figures as defined above are often referred to as “politically exposed persons” or PEPs. Refer to the expanded overview section, “Politically Exposed Persons,” page 290, for additional guidance, in particular with respect to due diligence on accounts maintained for PEPs that do not meet the regulatory definition of “private banking account” set forth in 31 CFR 1010.605(m). For private banking accounts for which a senior foreign political figure is a nominal or beneficial owner, the bank’s due diligence program must include enhanced scrutiny that is reasonably designed to detect and report transactions that may involve the proceeds of foreign corruption. The term “proceeds of foreign corruption” means any asset or property that is acquired by, through, or on behalf of a senior foreign political figure through

133 For purposes of this definition, the terms “senior official” or “senior executive” mean an individual with substantial authority over policy, operations, or the use of government-owned resources.

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