Passport and utility bills...why are we being so nosey?

23 Nov 2021

When buying an asset (a house, a car or an aircraft for example), it is incredibly important to know the history of the asset together with the identity of the seller. In fact, it is important to know who all the parties are in the transaction, especially where money will change hands – it just makes sense to check you are not exchanging money with a criminal!

Today’s regulatory environment means that nearly everyone needs to provide client due diligence (CDD):  the client to the corporate services provider, the tax advisor to the lawyer, the buyer to the seller. Having CDD ready in anticipation of being asked will certainly help speed up any transaction. And its not just for businesses; the UK’s Unexplained Wealth Order is just one example of legislation requiring people to reveal how they have come into possession of money.

What CDD will be required: generally the minimum the client should expect to be asked to provide are certified copies of their passport and utility bill. More documents and information may be required depending on the type of transaction, corporate structure and whether or not any party is regulated (for example, tax advisors and corporate services providers are regulated and therefore the level of CDD they are required to collect is dictated by law.)

Why CDD is required: at a legal and regulatory level, most jurisdictions now require parties to a transaction to establish the legitimacy of funds used to buy expensive assets. The rules generally require the party receiving funds to establish not just where the funds are coming from (the ‘Source of Funds’) but also how the payee came into possession of the funds (the ‘Source of Wealth’). It is important for all parties to comply with international legislation in this area and increasingly proof of any payments made need to be provided.

To summarise, compliance with CDD rules is mandatory for nearly all transactions: so don’t be offended, do be prepared, and save time by having your documentation ready.

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