According to the Financial Action Task Force (FATF), which step should an institution take if a customer is unable to provide identifying documentation without errors?

According to the Financial Action Task Force (FATF) Recommendations, if a financial institution is unable to satisfactorily complete the required Customer Due Diligence (CDD) measures, it must not open the account or commence the business relationship. The inability of a customer to provide accurate and valid identifying documentation constitutes a failure to complete CDD. Furthermore, the institution is required to consider the circumstances and determine if they warrant the filing of a suspicious activity report (SAR) or suspicious transaction report (STR). This approach ensures that institutions do not engage with individuals or entities they cannot properly identify, mitigating the risk of facilitating illicit financial activities.

A. Restrict similar customers from opening accounts and post a notice in the branches. This is a disproportionate and potentially discriminatory action not aligned with the FATF's risk-based approach, which focuses on individual customer risk.
B. Continue opening the account and request additional information within 90 days. This violates the core principle of completing customer identification and verification before or during the establishment of a business relationship, especially when red flags are present.
D. Request an information-sharing process and provide the error to other institutions. While information sharing is encouraged, the primary and immediate required action is to terminate the onboarding process and assess suspicion, not to broadcast the issue.

1. Financial Action Task Force (FATF). (2024). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation: The FATF Recommendations. FATF

Paris

France.

Reference: Interpretive Note to Recommendation 10 (Customer Due Diligence)

Paragraph starting "Where the financial institution is unable to comply..."

p. 59. This section explicitly states that if an institution cannot complete CDD

it should be required to "(a) not open the account

commence business relations or perform the transaction... and (c) consider making a suspicious transactions report in relation to the customer."

2. Financial Action Task Force (FATF). (2024). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation: The FATF Recommendations. FATF

Paris

France.

Reference: Recommendation 10 (Customer Due Diligence)

p. 15. This recommendation establishes the fundamental requirement for financial institutions to undertake CDD measures

which includes identifying and verifying the customer's identity. A failure to do so triggers the actions outlined in the interpretive note.