Know your customer – Why do we ask our customers to answer questions?
In order to be a reliable and responsible partner to our customers, cooperation partners, and to offer the best service and advice, we make sure that in our everyday activities we follow effective legislation and also one of the main principles of banking – ‘know your customer’.
Financial transactions are nowadays usually carried out via credit and financial institutions, which therefore have to follow stricter rules when dealing with customer data. This means that the banks need have an overview of its customers and the persons related to them, as well as of the economic activities of our customers.
In order to establish long-term customer relationships and to comply with the ‘know your customer’ principle, the bank must ask its customers to answer questions both at the start of and during their cooperation. The bank is required to ask customers to submit all kinds of data, incl. data that cannot be derived on the basis of an existing customer relationship.
We at BIG SIX & Partners have prepared a standard questionnaire for data collection and try to make answering the questions convenient for you: we use multiple choice questions wherever possible. You don’t have to visit a our office to give us (or update or change) the required data – you can submit everything via e-mail.
The questionnaire contains the data that our cooperation bank must collect from all customers, just as all other banks have to. This obligation arises from the Credit Institutions Act, the Money Laundering and Terrorist Financing Prevention Act and the Tax Information Exchange Act as well as the relevant guidelines of the Financial Supervision Authority and the Financial Intelligence Unit and the procedure of the BIG SIX & Partners.
The existence of the required data in the bank and updating them is important to guarantee everyone’s security and legal order. As a responsible Business consulting and Multi Family Office, we want to avoid ourselves and our customers becoming involved in unlawful activities and we also want to fight money laundering, tax evasion, illegal business activities, terrorist financing and so on.
We will also contact you after certain intervals in the future to specify or update the data. Please inform us as soon as possible if any of your data change. As the bank must check the submitted data with reliable sources and we must have a valid copy of the identity document of the customer or their representative, we may also contact you to request certain documents.
Based on our practice, we will now explain some terms and principles that have created questions among our customers.
Pursuant to § 8 of the Money Laundering and Terrorist Financing Prevention Act and the EU directive on which the Act is based, a beneficial owner is a natural person whose financial status is influenced by a transaction, i.e. the person who exercises control over the customer’s activities or in whose interests transactions are performed (e.g. a customer who is a natural person, a shareholder of the legal entity or a person who has voting rights or who influences the company’s activities on the basis of another contract).
Politically exposed person
The term ‘politically exposed person’ is defined in § 20 of the Money Laundering and Terrorist Financing Prevention Act, and pursuant to § 21 the bank ascertains whether the customer or persons related to the customer are politically exposed persons. The bank must apply enhanced due diligence measures to politically exposed persons.
A politically exposed person is:
1) a person performing prominent public functions (a head of state, a head of government, a minister, a deputy minister, a member of parliament, a justice of a supreme court, a member of the supervisory board of a state audit institution or central bank, an ambassador, a chargé d’affaires, a senior officer, a member of a directing, supervisory or administrative body of a public undertaking in their country of location or in the European Union or in another international organisation); or
2) a family member of a person listed in clause 1 (spouse or partner, child’s spouse or partner, their parents); or
3) a close associate of a person listed in clause 1.
Tax liability in a foreign country
As of 1 July 2014 all financial institutions are required to ask their customers whether they are US taxpayers, and as of 1 January 2016 all financial institutions must know whether their customers are also tax residents of an OECD or European Union Member State.
Said requirements are based on international agreements and the Tax Information Exchange Act effective in Estonia. As a result of these, Estonia must give the United States and OECD and European Union Member State information about the tax residents of the relevant countries located in Estonia.
In the case of legal entities, the bank must also know the tax residency of the persons who control them and receive additional data about them (e.g. their place of residence, tax identification number(s) and date and place of birth), and the bank may therefore contact the customer to obtain the relevant information.
Detailed information about OECD and European Union Member States and the tax identification numbers used in them is available here.
Estonian financial institutions must pass on information about the tax residents of the aforementioned countries (incl. the account holder’s name, tax residency, tax identification number and account balance) to the Estonian Tax and Customs Board, which sends the data to the competent authorities of the relevant countries within the scope of the Tax Information Exchange Act. Further information about this is available on the websites of the Ministry of Finance of the Republic of Estonia, the US Internal Revenue Service and the OECD.
Please fill in all required fields. We thank you in advance for your cooperation – you are making your own contribution to the prevention of illegal activities by answering the questions. All of the information you submit is confidential, we and our cooperation bank may forward it only in cases arising directly from law.
If we, or the bank does not obtain enough information from a customer, it may be unable to provide the requested services to them. This may force to restrict the services provided to the customer or cancel existing contracts.