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Guideline on Anti-Money Laundering and the Combating of Terrorist Financingprotectors/ controllers should be undertaken the earlier of the first instance of exercise ofpower conferred by the trust instrument or the issue of instruction to an advisor to provideadvice.Ongoing due diligence should be applied in the context of changes in any of the parties tothe trust, revision of the trust, addition of funds, investment of trust funds or distribution oftrust assets/provision of benefits out of trust assets.Financial institutions are required to inform the Central Bank when applicable laws andregulations in the domicile where trusts are established, prohibit the implementation of this<strong>guideline</strong>. The Central Bank will not approve the opening of such an account but willexpect the financial institution to conduct enhanced due diligence.Where the settlor is deceased, written confirmation should be obtained for the source offunds in the form, for example, of Grant of Probate, and/or copy of the will creating thetrust.Where a corporate trustee acts jointly with a co-trustee, the identity of any non-regulatedco-trustees should be verified.Verification should be made to ensure that any bank account on which the trustees havedrawn funds is in their names, and the identities of any additional authorized signatories tothe bank account should also be verified.Any application to open an account, or undertake a transaction, on behalf of anotherwithout the applicant identifying a trust or nominee capacity should be regarded assuspicious and requires further enquiries.Institutions should be particularly vigilant where there is no readily apparent connection orrelationship of the settlor to the beneficiaries of a trust. Since the economic nature of atrust is a mechanism for the settlor to benefit a beneficiary, typically, not in return for anyconsideration (payment, transfer of assets or provision of services), institutions shouldendeavour so far as possible to ascertain the settlor’s reasons for wanting to benefit abeneficiary with whom he seemingly has no connection. This can be a matter of greatsensitivity (for example where the beneficiary turns out to be a child of the settlor born outof wedlock) and institutions are encouraged to take this into account while pursuingnecessary or appropriate inquiries.Page 21 of 75
Guideline on Anti-Money Laundering and the Combating of Terrorist FinancingThere are a number of commercial structures in which a trust may feature as the legalowner, such as in debt repackaging arrangements. In such cases where the traditionalrelationship between the settlor and beneficiary is absent, institutions should demonstratethat they understand the commercial rationale for the arrangement and have verified theidentity of the various counterparties.Where a trustee whose identity has been verified is replaced, the identity of the newtrustee should be verified before the new trustee is allowed to exercise control over funds.12.3.2 (ii.) FoundationsA foundation (also a charitable foundation) is a legal characterization of a nonprofitorganization (NPO) that will typically either donate funds and support to otherorganizations, or provide the source of funding for its own charitable purposes. A privatefoundation is a legal entity set up by an individual, a family or group of individuals for apurpose such as philanthropy. Unlike a charitable foundation, a private foundation doesnot generally solicit funds from the public. In the case of foundations, financialinstitutions should obtain information on:-a) The foundation’s charter;b) The certificate of registration or document of equivalent standing in a foreignjurisdiction should be obtained in order to confirm the existence and legal standingof the foundation;c) The source of funds. In cases where a person other than the founder providesfunds for the foundation, institutions should verify the identity of that third partyproviding the funds for the foundation and/or for whom a founder may be acting;d) The identification evidence for the founder(s) and for officers and council membersof a foundation as may be signatories for the account(s) of the foundation; ande) The identification evidence should also be obtained for all vested beneficiaries ofthe foundation.12.3.2. (iii.) Executorships AccountsWhere a business relationship is entered into for the purpose of winding up the estate ofa deceased person, the identity of the executor(s)/ administrator(s) of the estate shouldbe verified. However, the identity of the executor or administrator need not normally beverified when payment from an established bank account in the deceased’s name isbeing made to the executor or administrator in accordance with the Grant of Probate orLetters of Administration solely for the purpose of winding up the estate. Payments tothe underlying beneficiaries on the instructions of the executor or administrator may bemade without verification of their identity.Page 22 of 75
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