IEIM403480 - Due Diligence: New Entity Accounts: Passive NFE, Controlling Persons

Due Diligence: New Entity Accounts: Passive NFE, Controlling Persons

Financial Institutions must determine whether a new entity Account Holder is a Passive NFE with one or more controlling persons who are Reportable Persons. If so, then the account must be treated as a Reportable Account. In making this determination the Financial Institution must follow the guidance below but may do so in the order most appropriate under the circumstances.

Determining whether the Account Holder is a Passive NFE

A Financial Institution may obtain a self-certification from the Account Holder to establish its status, or instead may use:

  • information in its possession (such as information collected pursuant to AML/KYC procedures); or
  • information that is publicly available (such as information published by an authorised government body or standardised industry coding system) based upon which it can reasonably determine that the Account Holder is an Active NFE or a Financial Institution.

Note though that a professionally managed investment entity resident in a Non-Participating Jurisdiction is always treated as a Passive NFE, notwithstanding that it would be treated as a Financial Institution if it were resident in a Participating Jurisdiction (this ensures that it is not possible for controlling persons to avoid reporting by setting up such entities in Non-Participating Jurisdictions).

Determining Controlling Persons

For the purposes of determining the Controlling Persons of an Account Holder, a Financial Institution may rely on information collected and maintained pursuant to AML/KYC Procedures.

Determining whether a Controlling Person is a Reportable Person

For the purposes of determining whether a Controlling Person of a Passive NFE is a Reportable Person, a Financial Institution may only rely on a self-certification from either the entity Account Holder or the Controlling Person.

This can be summarised in the following diagram (© OECD). Use this link to view diagram determining whether a Controlling Person is a Reportable person.