103520 – Due Diligence: Special Rules: Limits on Reason to Know: Examples

The following examples illustrate the application of the limits on the standards of ‘reason to know’:

Example 1: Reporting financial institution bank ‘A’ maintains a Depository Account for individual Account Holder ‘P.’

P holds a pre-existing Depository Account with A. A has relied on the address in its records for P, as supported by his passport and a utility bill collected upon opening of the account, to determine that P is a resident for tax purposes in jurisdiction X (application of the residence address test).

Five years later, P provides a power of attorney to his sister, who lives in jurisdiction Y, to operate his account. The fact that P has provided such power of attorney is not sufficient by itself to give A reason to know that the Documentary Evidence relied upon to treat P as a resident of jurisdiction X is unreliable or incorrect.

Example 2: Reporting Financial Institution insurance company ‘B’ has entered into a Cash Value Insurance Contract with individual Account Holder ‘D.’

The contract is a New Individual Account. B has obtained a self-certification from D and confirmed its reasonableness by the AML/KYC documentation collected from D. The self-certification confirms that D is resident for tax purposes in jurisdiction V.

Two years after B entered into the contract with D, D provides a telephone number in jurisdiction T to B. Although B did not previously have any telephone number in its records for D, the sole receipt of a telephone number in jurisdiction T does not in itself constitute a reason to know that the original self-certification is unreliable or incorrect.