Rule 69 Rules of Professional Conduct for Legal Practitioners

Rule 69 of the Rules of Professional Conduct for Legal Practitioners (RPC) 2023 is about Client due diligence. It is under Part III (Risk Based Approach and Client Due Diligence) of Chapter 2 (Guidelines and Rules on Anti-money Laundering and Combating Financing of Terrorism for Legal Practitioners) of the Rules. It provides as follows:

(1) A law firm or legal practitioner shall put in place internal measures to establish with certainty the identity of each client, and such measures should include procedures to—
(a) identify and appropriately verify the identity of each client on a timely basis ;

(b) identify with reasonable measures the real identity of the beneficial owner on risk-sensitive basis such that the law firm or legal practitioner is reasonably satisfied that it knows who the beneficial! owner is, in order to ascertain those natural persons who exercise effective influence or control over a client, whether by means of ownership, voting rights or otherwise ;
(c) determine the extent to which they are required to verify the identity of beneficial owner, depending on the type of client, business relationship and transaction, for the purpose of helping legal practitioners avoid conflicts of interest with other clients ;

(d) obtain appropriate information to understand the client’s circumstances and business depending on the nature, scope and timing of the services to be provided, including, where necessary, the source of funds of the client, and this information may be obtained from clients during the normal course of their instructions to the law firm or legal practitioner :
(e) conduct ongoing CDD on the business relationship and scrutiny of transactions throughout the course of that relationship to ensure that the transactions being conducted are consistent with legal practitioner’s knowledge of the client, its business and risk profile, including where necessary, the source of funds ; and

(f) ongoing due diligence ensures that the documents, date, or information collected under the CDD process is kept up-to-date and relevant by undertaking reviews of existing records, particularly for higher-risk categories of clients.

(2) Law firms or legal practitioners shall develop procedures to determine how the immediate client can be identified, and how the identity provided by the client may be verified.

(3) For the purposes of paragraph (2) of this rule the following procedures may be adopted—
(a) meeting the client in person and verifying their identity through the
production of a valid identity card and documentation confirming his or her address ;
(b) based on documentation or information obtained from dependable, publicly available sources (which are independent of the client), where available ;

(c) for clients that are companies or organizations, reasonable steps shall be taken so that the law firm or legal practitioner is satisfied about the identity of the beneficial owner and takes reasonable measures to verify the beneficial owner’s identity, by understanding the ownership and control of the company or organization that is the client, either through public searches or by seeking information directly from the client :

(d) law firm or legal practitioner shall obtain the following information for a client that is a legal entity—
(i) the name of the company,
(ii) the company registration number,
(iii) the registered address and principal place of business (if different),
(iv) the identity of shareholders or trustees and their percentage ownership (Where applicable),
(v) names of the board of directors, or trustees or principal members
responsible for the company’s operations,
(vi) the law to which the company or organization is subject and its memorandum and articles of association and constitution, and
(vii) the objects, types of activities and transactions in which the company or organization engages ;

(e) Law firms or legal practitioners shall verify information, and may use
sources such as the following—
(i) constitutional documents (such as a certificate of incorporation, memorandum and articles of association, constitution),
(ii) details from company registers with the company or organization and Corporate Affairs Commission,
(iii) shareholder agreement or other agreements between shareholders concerning control of the legal person, and
(iv) filed audited accounts ;

(f) in identifying beneficial owners, law firms or legal practitioners may use a combination of public sources and seek further confirmation from the immediate client that information from public sources is correct and up-to-date or ask for additional documentation that confirms the beneficial ownership and company structure ;

(g) law firms or legal practitioners may assess the risks that each client may pose taking into consideration any appropriate risk variables and any mitigating factors before making a final decision to either accept the client,
reject the client, or request additional information ;

(h) risk assessments shall be documented and kept in the client’s file, and the file should be reviewed as necessary, especially in a situation where the client looks to engage in a one-off or where new red flags arise ; and
(i) law firms or legal practitioners shall determine the CDD requirements appropriate to each client, which may include—
(i) a standard level of CDD, generally to be applied to all clients to whom specified legal services are provided,
(ii) in appropriate cases, a simplified level of CDD, generally a reduction of the standard level after consideration of appropriate risk variables, and in recognized lower risk scenarios, and
(iii) whether an enhanced CDD would be required for clients that are reasonably expected by the law firm or legal practitioner to be of higher risk should be determined, and this may be the result of the client’s business
activity, ownership structure, particular service offered including work involving higher risk countries or defined by applicable law or regulation as posing higher risk.

(4) Legal practitioners or law firms in conducting CDD may also look out for the following —
(a) where the transaction is unusual, for example if the type of document being notarized is clearly inconsistent with the size, age, or activity of the legal entity or natural person acting ;
(b) where the transactions are unusual because of their size, nature, frequency, or manner of execution ;

(c) where there are remarkable and highly significant differences between the declared price and the approximate actual values in accordance with any reference which could give an approximate idea of this value or in the
judgement of the legal practitioner ;
(d) where a non-profit organisation requests services for purposes or transactions not compatible with those declared or not typical for that body ;
(e) where the transaction involves a disproportional amount of private funding, bearer cheques or cash, especially if it is inconsistent with the socioeconomic profile of the individual or the company’s economic profile ;
(f) where the customer or third party is contributing a significant sum in cash as collateral provided by the borrower or debtor rather than simply using those funds directly, without logical explanation ;