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  1. Point in time
    2005-02-14

ML 3.1 The duty

Purpose and meaning of "client"

ML 3.1.1G

The purpose of this chapter is to ensure that relevant firms carry out the identification of clients. The chapter also makes clear that relevant firms must not, in general, carry out relevant regulated activities, or agree to do so, for a client or potential client unless the relevant firm has taken reasonable steps to check that client's identity. In this sourcebook "client" is defined differently from elsewhere in the Handbook and relevant firms should take care to ensure that they use the correct definition. There are special provisions in this chapter for cases where the person with whom the relevant firm has contact is acting for another. Broadly, the relevant firm has to enquire into the identity of both persons, unless a relevant exemption enables it to focus solely on the person it is actually in contact with.

Meaning of "transaction"

ML 3.1.2G

"Transaction" in this sourcebook includes the giving of advice, and thus has a wide meaning throughout this sourcebook. Certain sorts of transaction are exempted from these requirements. These include cases where the transaction is of relatively small value or the person has been vouched for by another person who can be relied on to have carried out these checks himself. But the various exemptions from the requirement are all subject to the overriding condition that there is nothing in place to put the relevant firm on enquiry ("knowledge or suspicion") in the money laundering context.

Identification of the client: the duty

ML 3.1.3R
  1. (1)

    A relevant firm must take reasonable steps to find out who its client is by obtaining sufficient evidence of the identity of any client who comes into contact with the relevant firm to be able to show that the client is who he claims to be.

  2. (2)

    If the client with whom a relevant firm has contact is, or appears to be, acting on behalf of another, the obligation in (1) is to obtain sufficient evidence of both their identities.

  3. (2A)

    If the client, or the person on whose behalf he is acting, engages in money service business and is registered with the Commissioners of the Customs and Excise, sufficient evidence of identity must include the registered number, within the meaning given by regulation 9(2) of the Money Laundering Regulations, of the client or the person on whose behalf he is acting.21

  4. (3)

    This rule is subject to the exceptions in ML 3.2.

ML 3.1.4G

[deleted]2

Financial exclusion

ML 3.1.5G

The guidance in ML 3.1.5 G to ML 3.1.7 G aims to help relevant firms ensure that, where people cannot reasonably be expected to produce detailed evidence of identity, they are not denied access to financial services. Although a relevant firm must always take reasonable steps to check who its client is, relevant firms will sometimes be approached by clients who are at a disadvantage, or who otherwise cannot reasonably be expected to produce detailed evidence that helps to confirm identity. An example could be where a person does not have a passport or driving licence, and whose name does not appear on utility bills.

ML 3.1.6G

If a relevant firm has reasonable grounds to conclude that an individual client is not able to produce detailed evidence of his identity and cannot reasonably be expected to do so, the relevant firm may accept as identification evidence a letter or statement from a person in a position of responsibility who knows the client that tends to show that the client is who he says he is, and to confirm his permanent address if he has one.

ML 3.1.7G

Examples of persons in a position of responsibility include solicitors, doctors, ministers of religion, teachers, hostel managers and social workers.

Identification of the client: timing

ML 3.1.8R
  1. (1)

    A relevant firm must comply with the obligation in ML 3.1.3 R (1) as soon as reasonably practicable after it has contact with a client with a view to:

    1. (a)

      agreeing with the client to carry out an initial transaction; or

    2. (b)

      reaching an understanding (whether binding or not) with the client that it may carry out future transactions.

  2. (2)

    If the client does not supply evidence of identity within the time scale in (1), the relevant firm must:

    1. (a)

      discontinue any regulated activity it is conducting for him; and

    2. (b)

      bring to an end any understanding it has reached with him;

    unless in either case the relevant firm has informed the National Criminal Intelligence Service (NCIS).

ML 3.1.9R

Nothing in ML 3.1.8 R (2) requires a relevant firm to continue with a transaction which conflicts with its obligations, if any, in relation to rights of a third party.