Undertaking Customer Due Diligence on your customer’s customer

The transmission of money abroad poses a high risk of money laundering, thus requiring vigilance by financial sector institutions. It therefore comes as no surprise that for well over a decade, this area has attracted ongoing regulatory attention in the UK as well as at an EU and intergovernmental level.

In September 2015, the Advocate General to the ECJ delivered an Advisory Opinion on the Customer Due Diligence expectations of regulated entities dealing with regulated clients. If adopted by the ECJ, the expectations of regulated entities will be raised and in certain circumstances they will be expected to conduct CDD on their "customer’s customers". Additionally, the Opinion also promotes a wide interpretation of "suspicion" and has the potential to encourage financial institutions to de-risk aggressively, a message which is at odds with recent domestic and inter-governmental guidance.

In an article first published on the White Collar Crime Portal, Jonathan Fisher QC looks more in-depth into the Safe Interenvious case referred by the Spanish court, the Advisory Opinion and the implications for practitioners. The author thanks  Anita Clifford for the assistance offered in writing this article.

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