An offshore company is owned by four equal partners that reside in separate jurisdictions. One partner presents an authenticated power of attorney…

The most critical and foundational step in any new client relationship is Customer Due Diligence (CDD), as mandated by global AML/CFT standards. For a high-risk entity like an offshore company with beneficial owners in multiple jurisdictions, the initial action must be to identify and verify the identities of all ultimate beneficial owners—in this case, all four partners. The presence of significant red flags, including the use of a power of attorney, the offshore structure, and the expressed urgency for a large deposit, heightens the risk and reinforces the necessity of completing this fundamental verification step before any other action is taken or the account is opened.

B. Verifying the source of funds is a crucial part of due diligence, but it logically follows the initial, mandatory step of verifying the customer's identity.
C. Filing a suspicious transaction report at this stage is premature. The bank must first attempt due diligence; a report is filed if due diligence raises unresolved suspicions.
D. Financial institutions do not report directly to the Egmont Group. They file suspicious transaction reports with their own country's Financial Intelligence Unit (FIU).

1. Financial Action Task Force (FATF). (2023). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation - The FATF Recommendations. FATF, Paris, France.

Recommendation 10 (Customer Due Diligence): This recommendation explicitly states that financial institutions must be required to undertake CDD measures when "establishing business relations." The Interpretive Note to Recommendation 10, section (a), specifies this includes "Identifying the customer and verifying that customer’s identity using reliable, independent source documents, data or information" and "(b) Identifying the beneficial owner and taking reasonable measures to verify the identity of the beneficial owner." This is the required initial step.

2. The Wolfsberg Group. (2014). Wolfsberg Guidance on Powers of Attorney and Other Authorities.

Section 3, "Risk Factors and Mitigation": The guidance notes that POAs can be used to obscure beneficial ownership and that Financial Institutions (FIs) "should seek to identify and verify the identity of the principal(s) and beneficial owner(s) in accordance with the FI’s AML/KYC policies and procedures." This confirms that verifying all partners is the correct procedure.

3. ACAMS. (2020). Certified Anti-Money Laundering Specialist (CAMS) Study Guide.

Chapter 2, "Compliance Standards for Anti-Money Laundering and Combating the Financing of Terrorism": The guide establishes that the cornerstone of an effective AML/CFT program is a robust CDD/KYC process. It details that for legal persons, this process must begin with identifying and verifying the identity of the ultimate beneficial owners before the business relationship is established. The scenario's elements (offshore company, POA, urgency) are classic examples of high-risk indicators requiring stringent upfront CDD.