Customer Onboarding Scenarios

Q2 2023 Training

Lan’s Enterprise Limited Training Program

Training Objectives

What you’ll learn today:

  • Identify required persons and entities in complex corporate structures
  • Determine appropriate documentation for different customer types
  • Recognize beneficial ownership requirements and thresholds
  • Apply enhanced due diligence for high-risk scenarios
  • Navigate PEP identification and risk management

How This Training Works

Interactive Scenarios

  • Read each scenario carefully
  • Think about your approach before revealing the answer
  • Consider who, what, and which forms you need
  • Compare with best practice solutions

Scenario 1

Amazing Dude Limited

Scenario 1: The Facts

AMAZING DUDE LIMITED

  • New Zealand registered company
  • Industry: Textile
  • Structure: 2 directors, 2 shareholders
  • Shareholder 1: Professional trustee company (30% shares)
  • Shareholder 2: AMAZIONG DUDE PTY LIMITED - Australian company (70% shares)
  • Additional: 2 employees appointed as authorized persons

Scenario 1: Your Task

Think about it…

What persons/entities do you need to identify?

What documents do you need to obtain?

Which internal forms will you use?

Scenario 1: Who to Identify

Persons and Entities Required

  1. The Company: AMAZING DUDE LIMITED
  2. Directors: Both directors (2 persons)
  3. Beneficial Owners:
    • Professional trustee company (30%) - Look through to underlying beneficiaries
    • AMAZIONG DUDE PTY LIMITED (70%) - Identify its beneficial owners
  4. Authorized Persons: 2 employees with transaction authority

Scenario 1: Key Consideration

Beneficial Ownership Look-Through

Professional Trustee Company (30%)

  • Must identify trust settlor, trustees, beneficiaries
  • Obtain trust deed or beneficiary confirmation

Australian Corporate Shareholder (70%)

  • Must identify ultimate beneficial owners of AMAZIONG DUDE PTY LIMITED
  • Look through until you reach natural persons with 25%+ control

Scenario 1: Required Documents

Documentation Checklist

  • Company: NZ Companies Office certificate, constitution
  • Directors: Certified ID (passport/driver license) + proof of address
  • Professional Trustee: Trust deed, beneficiary list, trustee details
  • Australian Company: ASIC extract, beneficial ownership details, director IDs
  • Authorized Persons: Certified ID + proof of address + authorization letter

Scenario 1: Internal Forms

Forms to Complete

  • CDD Form - Corporate Customer
  • Beneficial Ownership Declaration Form
  • Authorized Signatory Form (for 2 employees)
  • Risk Assessment Form
  • Source of Funds/Wealth Declaration (if high value)

Scenario 2

Everything Is Awesome Limited

Scenario 2: The Facts

EVERYTHING IS AWESOME LIMITED

  • Australia registered company
  • Industry: High value jewellery dealer
  • Annual turnover: NZD 2,000,000+ with us
  • Structure: 2 directors, 2 shareholders
  • Shareholder 1: Individual (not a director) - 25% shares
  • Shareholder 2: Nominee company - 75% shares

Scenario 2: Risk Flags

What makes this higher risk?

  • High value jewellery = Designated business under AML/CFT Act
  • Large transaction volume = NZD 2M+ annually
  • Nominee company = Beneficial ownership obscured
  • Foreign entity = Additional verification needed

Scenario 2: Your Task

Think carefully…

Who do you need to identify?

What enhanced measures are required?

Why is this customer higher risk?

Scenario 2: Who to Identify

Persons and Entities Required

  1. The Company: EVERYTHING IS AWESOME LIMITED
  2. Directors: Both directors (2 persons)
  3. Individual Shareholder: 25% shareholder (meets 25% threshold)
  4. Nominee Company: 75% shareholder - MUST look through
  5. Ultimate Beneficial Owners: Natural persons behind the nominee

Scenario 2: Critical Point

Nominee Companies

A nominee company holds shares on behalf of others

  • Never accept the nominee company as the beneficial owner
  • Always look through to identify the real beneficial owner(s)
  • Obtain nominee agreement or beneficial ownership declaration
  • Verify identity of ultimate natural persons

Scenario 2: Required Documents

Enhanced Documentation

  • Company: ASIC extract, constitution, business profile
  • Directors: Certified ID + proof of address + ASIC director details
  • Individual Shareholder (25%): Certified ID + proof of address
  • Nominee Company: Nominee agreement + beneficial ownership declaration
  • Ultimate Beneficial Owners: Certified ID + proof of address for all 25%+ owners
  • Business Verification: Jewellery dealer license, industry registration

Scenario 2: Internal Forms

Enhanced Due Diligence Forms

  • CDD Form - Corporate Customer
  • Beneficial Ownership Declaration Form (critical!)
  • Enhanced Due Diligence Form (high-value dealer)
  • Risk Assessment Form (rate as medium-high risk)
  • Source of Funds/Wealth Declaration
  • Ongoing Monitoring Schedule (enhanced frequency)

Scenario 2: Why Enhanced CDD?

Risk Factors Trigger Enhanced Measures

  • High value goods dealer (jewellery)
  • Significant transaction volume (NZD 2M+)
  • Use of nominee structure
  • Cross-border business operations
  • Industry with ML/TF vulnerabilities

Scenario 3

Mr OMG - The PEP Challenge

Scenario 3: The Facts

MR OMG

  • British national living in New Zealand
  • Receiving inheritance: GBP 520,000 from deceased grandmother (UK)
  • Intends to transfer funds to New Zealand
  • Discovery: Father is a UK Parliament member

Scenario 3: The Red Flag

What changed during onboarding?

Initial Assessment: Standard individual customer

New Information: Father is UK Parliament member

Status Change: Customer is now a Family Associate of a PEP

Scenario 3: Your Task

Stop and think…

What is the customer’s PEP status?

What level of due diligence is required?

What additional checks do you need?

Scenario 3: PEP Classification

Understanding PEP Categories

Mr OMG is a “Family Associate PEP”

  • Not himself a politically exposed person
  • His father holds prominent public function (Parliament member)
  • Family relationship creates PEP association
  • Requires Enhanced Due Diligence

Scenario 3: Who to Identify

Persons Required

  1. The Customer: Mr OMG (British national)
  2. The PEP: Father - UK Parliament member
  3. Source of Wealth: Deceased grandmother’s estate
  4. Relationship Verification: Family connection to PEP

Scenario 3: Required Documents

Enhanced Documentation for PEP

Identity & Residence

  • Certified passport (British)
  • Proof of NZ address
  • NZ residency/visa status

Source of Funds/Wealth

  • Grandmother’s death certificate
  • Probate documents or will
  • UK solicitor confirmation letter
  • Bank statements showing inheritance receipt

Scenario 3: PEP Verification

Additional PEP Checks

About the PEP (Father)

  • Confirm position: UK Parliament member
  • Determine current status (active or retired)
  • Search adverse media and sanctions lists
  • Document PEP relationship to customer

About the Transaction

  • Verify legitimacy of inheritance
  • Confirm source is not connected to PEP position
  • Assess risk of corruption or illicit funds

Scenario 3: Internal Forms

PEP Due Diligence Forms

  • CDD Form - Individual Customer
  • PEP Declaration & Assessment Form
  • Enhanced Due Diligence Form
  • Source of Funds/Wealth Verification Form
  • Senior Management Approval Form (required for PEP relationships)
  • Ongoing Monitoring Schedule (enhanced - at least annually)

Scenario 3: Critical Steps

PEP Onboarding Process

  1. Identify the PEP relationship (father = Parliament member)
  2. Classify customer as Family Associate PEP
  3. Apply Enhanced Due Diligence measures
  4. Verify source of funds is legitimate (inheritance)
  5. Obtain senior management approval before onboarding
  6. Establish enhanced ongoing monitoring

Scenario 3: Risk Assessment

Why This Matters

PEPs = Higher Risk

  • Potential for corruption or bribery
  • Access to public funds or influence
  • Reputational risk for the business

Inheritance = Lower Risk

  • Legitimate source (deceased estate)
  • Verifiable through legal documentation
  • Not connected to PEP’s political position

Net Assessment: Enhanced CDD justified but manageable risk

Common Themes Across Scenarios

Key Patterns to Remember

  1. Look Through Structures: Never stop at nominee/trustee companies
  2. 25% Threshold: Always identify beneficial owners with 25%+ control
  3. Enhanced CDD Triggers: High-value, foreign entities, PEPs, complex structures
  4. Documentation: More complex = more documents required
  5. Senior Approval: PEPs and high-risk relationships need management sign-off

Beneficial Ownership Quick Reference

The 25% Rule

Individual Shareholders

  • 25%+ ownership = Must identify as beneficial owner

Corporate/Trustee Shareholders

  • Always look through to natural persons
  • Identify who ultimately controls 25%+

Nominee Companies

  • Never the beneficial owner
  • Must obtain underlying ownership details

Documentation Standards

Quality Requirements

Certified Copies

  • “True copy” certification by acceptable certifier
  • Within 3 months (for identity documents)
  • Clear, legible, complete

Foreign Documents

  • Official registry extracts where available
  • English translation if needed
  • Apostille for certain jurisdictions

Risk-Based Approach

Escalating Due Diligence

Standard CDD

  • Simple structure, low-risk customer
  • Basic identity and verification

Enhanced CDD

  • Complex ownership, high-value, PEPs
  • Additional documentation and verification
  • Senior management approval
  • Enhanced ongoing monitoring

When to Escalate

Red Flags Requiring Enhanced CDD

  • Customer is a PEP or PEP associate
  • High-risk industry (jewellery, cash-intensive)
  • Complex ownership structures (nominees, trusts)
  • Large transaction values or volumes
  • Foreign entities from high-risk jurisdictions
  • Unusual or inconsistent business activities
  • Adverse media or sanctions concerns

Key Takeaways

Remember These Points

  1. Corporate Structures: Always identify all 25%+ beneficial owners and look through nominees/trustees to natural persons

  2. Enhanced CDD: High-value dealers, PEPs, and complex structures automatically trigger enhanced measures and senior approval

  3. PEP Categories: Family associates (like children, parents, spouses) of PEPs require the same Enhanced Due Diligence as the PEP themselves

Practical Application

Your Next Steps

  • Review your current customer files against these scenarios
  • Identify any customers requiring enhanced documentation
  • Update beneficial ownership records for corporate customers
  • Flag any PEP relationships for enhanced monitoring
  • Escalate to AML Compliance Officer if uncertain

Contact & Resources

For Further Information

  • AML Compliance Team: aml@gmfinance.co.nz
  • Emergency Hotline: +64 09-309-8808
  • Training Program: Lan’s Enterprise Limited

Questions?

Discuss these scenarios with your team

Review your onboarding procedures

Contact compliance if you need clarification

Thank You

Stay Vigilant, Stay Compliant