Art. 18 Identification of the purpose and intended nature of a business relationship or occasional transaction | RTS on customer due diligence | AML

This article operationalises the customer due diligence requirements set out in Articles 20(1)(c) and 25 of Regulation (EU) 2024/1624 by specifying, in considerable detail, the categories of information that obliged entities must gather to understand the nature of a business relationship or occasional transaction.

It covers five broad areas of inquiry: the purpose and rationale behind the relationship or transaction, the estimated scale of activity, the source of funds, the destination of funds, and the customer's business activity or occupation.

Rather than mandating the collection of all items listed, the article requires at least one piece of information from each relevant category, where necessary, giving obliged entities a degree of flexibility in how they satisfy each theme.

Important points:

Collect, where necessary, information across five key areas — purpose, estimated activity, source of funds, destination of funds, and customer occupation — to understand the nature of the business relationship or occasional transaction.
At least one item from each applicable category is sufficient, but the nature of the product or service provided must be taken into account when assessing the purpose and rationale.
The source of funds category covers a wide range of origins, from employment income and business revenue to inheritance, gifts, and legal settlements, requiring obliged entities to understand both how funds were generated and how they were transferred.

For the purposes of Article 20(1), point (c), and Article 25 of Regulation (EU) 2024/1624, obliged entities shall obtain, where necessary:
1. in relation to the purpose and economic rationale of the occasional transaction or business relationship, taking into account the nature of the product or service provided, at least one of the following information:
  the reason the customer has requested the obliged entities’ products or services;
  the intended use of the products or services requested by the customer;
  the reason for performing the occasional transaction;
  whether the customer has additional business relationships with the obliged entity or, where applicable, its wider group, and the extent to which that information influences the obliged entity’s understanding of the customer.
2. in relation to the estimated amount of the envisaged activities, at least one of the following information:
  the estimated amount of funds to be deposited;
  the estimated amount of funds to be used in connection with the product offered or service provided;
  information to understand the anticipated type and frequency of activities that are likely to be performed during the business relationship or occasional transaction;
  information to understand the anticipated number, size, volume, type and frequency of transactions that are likely to be performed during the business relationship or occasional transaction.
3. in relation to the source of funds, at least one of the following information to understand the activity that generated the funds and the means through which the customer’s funds were transferred:
  employment income, including salary, wages, bonusses and other compensation from employment;
  pension or retirement funds and government benefits including social benefits;
  grants;
  business revenue;
  capital provided by shareholders and intercompany funding;
  loans and credit facilities;
  savings and investments income;
  inheritance, gifts, sales of assets and legal settlements.
4. in relation to the destination of funds, at least one of the following information:
  the expected types of recipient(s);
  the jurisdiction where the transactions are to be received;
  whether the recipient of funds is the intended beneficiary of the transferred funds, or acting as intermediary for the beneficiary.
5. in relation to the business activity or the occupation of the customer, at least one of the following information:
  the occupation of the customer, including information on the customer’s employment status;
  the sector in which the customer is active, including information on customer’s industry, operations, products and services;
  whether the business activity or the occupation of the customer is regulated;
  whether the customer is an obliged entity and the sector in which the customer operates;
  whether the customer is actively engaged in business;
  geographical presence of the customer;
  information on the main sources of revenues of the customer;
  key stakeholders of the customer.