Are you a politically exposed person?

A new batch of rules and regulations is soon to make banking in Brussels far more onerous than at present.

Recent letters sent to some Belgian bank account holders which asked for further identification checks are likely to be just the tip of an iceberg.

The letters require account-holders to appear at their branch in person with the letter, personal identification and proof of address. Failure to show within one month can result in the account being ‘frozen’ and ‘services limited’.

On the face of it, this is a notable step in the right direction to prevent money laundering. However, the latest EU legislation is likely to make banking more complex for the many diplomatic and EU staff in Brussels.

The new rules, which are to be introduced by 15 December 2007, are contained in the third anti-money laundering directive, which attempts to realise 40 recommendations made by the Financial Action Task Force (FATF), an international body which is supported by the Organisation for Economic Co-operation and Development. The directive updates some aspects of current enforcement and alters others significantly.

In essence, there are three steps to money-laundering, known as placement, layering and integration. The rules which will mean more red tape at bank counters relate mainly to the first step, placement. This is the process of putting your dirty notes and ill-gotten gains into the banking or financial system. Since there are only so many ways to pay into a bank account, this is the more difficult of the steps to achieve.

The upgrade in standards of identification relates to the concept of KYC, which stands for ‘Know Your Customer’. These updated KYC rules could well cause problems for the new batch of stagiaires just arriving in Brussels and many more to come.

In Belgium where communes and red tape rule, many new arrivals will not acquire a relevant utility bill in their short five-month stay, assuming that they even try. In time, this could cause administrators in the EU institutions a few problems as bank accounts are frozen, payments bounce and stagiaires find themselves unable to get access to money.

It could also cause problems for others in the Euroquarter of Brussels. The new directive makes special additional provisions for a PEP, otherwise known as a politically exposed person. It asserts that "particularly rigorous customer identification and verification procedures are required" in the case of PEPs because of a greater risk of money laundering and banks are told that special attention should be paid to individuals holding, or having held, important public positions, particularly those from countries where corruption is widespread, who live in another member state or a third country. The extra attention should also apply to an immediate family member or close associate of such a person.

An important change is that the banks and financial companies are supposed to pursue a risk-based approach. They are to focus their resources on monitoring their higher risk customers. The emphasis is on using ongoing risk assessment to monitor accounts and determine what transactions are suspicious.

For expatriate, potentially politically exposed, high-earning individuals who occasionally or regularly transfer funds abroad, these rules could become all too familiar.

The Money Laundering Reporting Officer at your bank might choose to group everyone together under the label of government.

The next time you plan to visit the bank, remember to carry your passport and two recent utility bills.

• Stuart Langridge is an independent financial adviser. www.stockexchangesecrets.com

A new batch of rules and regulations is soon to make banking in Brussels far more onerous than at present.

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