Mitigating Risks with Introduced Business Relationships

Summary

This is joint guidance issued by the BVI Financial Services Commission (FSC) and the Financial Investigation Agency (FIA) on managing money laundering, terrorist financing and proliferation financing risks that arise when a licensee relies on a third-party Introducer to carry out customer due diligence. It applies to financial institutions supervised by the FSC and designated non-financial businesses and professions (DNFBPs) supervised by the FIA, and explains how to comply with the existing introduced-business provisions in the AML/CFT/CPF Code of Practice and AML Regulations, aligned with FATF Recommendation 17.

• Scope: Applies only where a licensee relies on an Introducer to collect customer due diligence information; does not apply where the licensee itself performs its own due diligence on introduced customers.
• Due diligence on Introducers: Licensees must satisfy themselves that an Introducer has carried out required AML/CFT/CPF due diligence, including identifying and verifying beneficial owners and understanding ownership and control structures, before relying on that Introducer.
• Information licensees must obtain: On reliance, licensees must immediately obtain customer identification information, beneficial ownership information, and information on the purpose and intended nature of the business relationship from the Introducer.
• Ongoing monitoring: Licensees are expected to ratify third-party relationship agreements and conduct ongoing testing and monitoring of introduced business relationships and Introducers' procedures.
• Termination: Where an Introducer or intragroup introducing entity no longer meets requirements, licensees must terminate the relationship, retrieve CDD records, and take steps regarding affected customer relationships.
• Governance: Boards of Directors are expected to provide oversight of, and approve, introducer relationships as part of the licensee's AML/CFT/CPF compliance framework.
• Best practices (non-binding): The guidance recommends maintaining a Register of Introducers, applying a risk-based approach to third-party scrutiny, and monitoring cybersecurity and data protection risks arising from reliance on third parties.

The guidance does not create new legal obligations but explains how licensees should apply existing AMLTFCOP sections 31, 31A and 31B and AML Regulations 7, 7A and 7B when using introduced business arrangements, particularly given elevated risk identified in the trust and corporate services provider (TCSP) sector.

Key obligations

• Before relying on an Introducer, a licensee must ascertain that the Introducer has carried out all due diligence measures required under VI law, including beneficial ownership identification and understanding ownership and control structures.
• Licensees must immediately obtain from the Introducer customer identification information, beneficial owner information, and information on the purpose and intended nature of the business relationship.
• Licensees must conduct due diligence to ensure the suitability of Introducers and ratify third-party relationship agreements.
• Licensees must test and monitor introduced business relationships and Introducers' procedures on an ongoing basis.
• Where an Introducer or intragroup introducing entity no longer meets requirements, the licensee must terminate the relationship, retrieve CDD information and records, or commence terminating relationships with customers introduced by that entity.
• Boards of Directors must provide oversight in reviewing and approving introducer relationships.
• Licensees must implement controls addressing cybersecurity and data protection risks arising from reliance on third-party Introducers.
• Licensees must cooperate with Competent Authorities and law enforcement agencies by providing requested information to fulfil AML/CFT/CPF and international cooperation obligations.

Applies to

banking, insurance, trust and company services providers (TCSPs), investment business, financing business, money service businesses (MSBs), insolvency services, virtual asset service providers (VASPs), legal practitioners, notaries public and accountants, real estate agents, dealers in precious metals and stones (DPMS), high value goods dealers (HVGD), vehicle dealers, persons engaged in the business of buying and selling boats

Deadlines

• immediately: Licensee relying on an Introducer must immediately obtain customer identification, beneficial ownership, and purpose/nature-of-relationship information from the Introducer.