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Know your customer

Establishing and maintaining customer relationships - Know-Your-Customer principle

In our everyday business activity, SEB follows the effective legislation and the principles of Best Practice. Being a reliable partner for both, the new as well as the existing customers is important for us. In order to provide the best service and ensure trustworthy operation of the financial sector, SEB follows one of the basic principles and commitments in banking: Know Your Customer.

According to the Money Laundering and Terrorist Financing Prevention Act, effective in the Republic of Estonia, and other legislation established in the European Union, the credit institutions, operating in Estonia, are obliged to establish the identity of their customers. Likewise, they are obliged to collect and examine the data of the customers and update these on a regular basis. The customer’s data must be accurate and up-to-date.

It is only natural that businesses and associated persons change in course of time. Accordingly, from time to time we contact you with a request to update your data. This means that we need information also about the ultimate beneficial owners and the nature of your business. In the interest of clarity we may ask you further questions or request documents confirming the presented data, when concluding a contract or at any given moment during the validity of the contract.

We look forward to your cooperation and understanding and ask for clear answers to our data inquiries. We give our best to avoid any unnecessary delays in carrying out the transactions and providing the services.

The entire information submitted to us by the client is confidential and we are allowed to forward it only in cases prescribed by law.

Exchange of tax information with the USA

In April 2014, Estonia and USA concluded an intergovernmental agreement, based on which Estonia undertakes to provide USA with information about taxable persons of the USA residing in Estonia. This intergovernmental agreement is based on the US act “Foreign Account Tax Compliance Act” or FATCA adopted in 2010, pursuant to which financial institutions all over the world shall identify clients, who must pay taxes in the USA.

Estonia has adopted Tax Information Exchange Act, to implement the FATCA agreement.

From 1 July 2014, the financial institutions must ask their customers, whether they are taxable persons in the USA. In case of a legal person, it is also asked, if their ultimate beneficial owners are taxable persons or citizens of the USA.

Taxable persons of the USA are, for example, US citizens and residents for tax purposes, and the persons, who are entitled to settle in the USA at any time (Green Card).

We ask a legal person, to disclose the residence for tax purposes and citizenship of the ultimate beneficial owner of the company. If the ultimate beneficial owner is a taxable person or citizen of the USA, we ask to disclose the US federal taxpayer’s identification number (TIN). A taxable person of the USA (natural, as well as legal persons) shall be asked to fill in a form established by US Internal Revenue Service (IRS), where TIN (taxpayer identification number) shall be added. The customer will get this number from his US tax administrator.

Estonian financial institutions are obliged to submit the information regarding taxable persons of the USA (including data on the account owner, info on tax residency and account balance) to the Estonian Tax and Customs Board, who will pass this information on to the IRS.

Please be aware that if a customer does not submit the required information, the financial institution will be obliged to submit data of the person to the Tax and Customs Board.

Further information about FATCA is available on the website of the Ministry of Finance and on the website of the US Internal Revenue Service.

Exchange of information with the EU Member States and the OECD Member States

Likewise to the USA, Estonia will be exchanging information also with the European Union (EU) Member States and the OECD Member States.

The basis of information exchange with the OECD countries is the Convention on Mutual Administrative Assistance in Tax Matters, which Estonia signed on 29.05.2013.

The basis for exchanging information in the EU is the Council Directive 2014/107/EU, adopted on 9 December 2014 supplementing Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation based on the OECD standard.

The tax information exchange with the EU and OECD Member States is similar to the exchange of information with the USA. The legal grounds for gathering and exchanging information are stipulated in the Tax Information Exchange Act.

Tax information exchange with the EU and OECD Member States starts in 2017; however information will be gathered starting from 2016.

We ask our customers to fill in and sign the Client Data Sheet, the questions contained in which are necessary for exchanging the tax information – e.g. we ask private persons to give information on their tax residency/residencies and legal persons on the tax residency/residencies of ultimate beneficial owners, besides we want to know the place of birth of ultimate beneficial owners.

Further information on the exchange of tax information between the EU and OECD Member States can be found on the website of the Ministry of Finance.

 

Identifying ultimate beneficial owners in SEB Pank

In order to comply with the Money Laundering and Terrorist Financing Prevention Act, SEB Pank gathers data about the ultimate beneficial owners of businesses separately, i.e. independently. Our client will always have the opportunity to submit data about the ultimate beneficial owners and the client also has the responsibility to keep that information up to date.

Legal persons whose ultimate beneficial owner does not have to be identified

The ultimate beneficial owner does not have to be verified for the following forms of enterprises:

  • apartment or building association;
  • company that is listed on a regulated market to whom disclosure requirements complying with European Union law or equivalent international standards are applied (except, for example, a company quoted on the Russian or Indian stock market);
  • a legal person governed by public law.

Who is the ultimate beneficial owner?

The ultimate beneficial owner is an individual

  • who has direct ownership of the association: the person holds more than 25% of the shares;
  • who has indirect ownership of the association: the person has another association or several other associations that hold more than 25% of the shares of the association in question; or
  • who has control over the association in another way: the person influences the association completely, no matter the volume of shares, voting rights or ownership rights, or the direct or indirect nature of it

If it is not possible to determine the ultimate beneficial owner, then a member of the highest directing body will be identified as the ultimate beneficial owner, i.e.

  • the chairman of the board or the supervisory board of the association
  • in their absence, all the members of the board or the supervisory board. In the case of a directing body with more than five members, the members with a greater right of representation will be preferred (the information is on the B-card of the commercial register); in the existence of a supervisory board, the five members of the supervisory board who

- take part in making the strategic decisions of the association the most and
- influence the everyday activities, transactions, and financial relations of the associations the most

will be identified as the ultimate beneficial owners.

How to verify the ultimate beneficial owner?

In the case of a self-employed person, it is presumed that they are the ultimate beneficial owner.

In the case of a branch of a foreign company, the ultimate beneficial owners are the owners of the foreign company. If they cannot be verified, then the head of the branch is identified as the ultimate beneficial owner.

In the case of a non-profit association (including congregations),

  • the chairman of the board or,
  • in their absence, the members of the board that have a greater right of representation (the information is on the B-card of the commercial register)

will be identified as the ultimate beneficial owner(s).

In the case of a foundation, the chairman or the members of the management board or of the supervisory board will be identified as the ultimate beneficial owner(s).

In the case of an investment fund, a trust fund, a partnership, a community, or any other association that is not a legal person, the ultimate beneficial owner is an individual

  • who owns the association indirectly or directly or
  • who has control over the association in another way, by being the association’s

- founder or a person who has transferred assets to the pool of assets;
- trustee, asset manager, or asset holder;
- person who preserves and controls the assets (if such a person has been appointed) or
- beneficiary or (if the beneficiary/beneficiaries will be appointed in the future) the circle of persons in whose interest the association was founded or is active.

If the ultimate beneficial owner of the fund cannot be clearly verified, then the members of the highest directory body will be identified as the ultimate beneficial owner(s).

In the case of association in the ownership of state and local authorities,

  • the authority of the relevant administrative unit (e.g. the minister, the rural municipality mayor, or the mayor) or
  • the members of the highest directory body

will be identified as the ultimate beneficial owner(s).

For example, if 40% of the enterprise belongs to the city and 60% belongs to the rural municipality, then the chairman of the board or of the supervisory board of the enterprise, the rural municipality mayor, or the mayor will be identified as the ultimate beneficial owner.

In the case of a subsidiary of a publicly traded company, the chairman of the board or of the supervisory board or a member or members of the board or of the supervisory board will be identified as the ultimate beneficial owner(s).

Looking after the timeliness of the information with the client

SEB Pank identifies ultimate beneficial owners according to the aforementioned principles.

The relationship between the bank and the client is mostly based on trust. Above all, it is the client who provides information about ultimate beneficial owners to the bank and to the commercial register. If the bank has doubts about the information not being correct, then it is the responsibility of the bank to check the circumstances concerning the ultimate beneficial owners.

 

Looking forward to the your cooperation and understanding
SEB

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