What is Money laundering and Terrorist financing?
Money laundering means actions aimed at legalising or concealing the origin of proceeds from crime or of other criminal assets.
Terrorist financing means the direct or indirect collection or release of financial resources or other assets with a view to using them or knowing that they will be wholly or partly used for the purpose of carrying out one or more terrorist acts or that they will be transferred to a terrorist group or to an individual terrorist.
Why is ERGO obliged to comply with the requirements for the prevention of money laundering and terrorist financing?
ERGO, as an insurance company carrying out life insurance activities, is a financial institution (obliged entity) responsible for the prevention of money laundering and terrorist financing (ML/TF).
The company must ensure that its infrastructure, products and/or services are not used by people who have illegal goals, thereby developing the trust of existing and future client.
What is KYC?
Know Your Customer (KYC) are the principles designed to protect financial institutions and the economy against ML/TF related risks. KYC consists of few steps to be done by the obliged entity: for example, identify the client make sure that the source of funds is legitimate etc.
Legislation on the prevention of money laundering and terrorist financing imposes very strict requirements on the processes and control measures to be implemented in a company, and sanctions are imposed not only for cases of actual money laundering, but also for non-compliance with these measures.
ERGO has a legal obligation to perform KYC by collecting certain information about clients.
What is client’s identification?
According to the regulations, ERGO as an obliged entity must identify the client prior to establishing a business relationship. To identify a natural person, we apply methods of identification required by law, for example, request to present a valid personal identification document.
When identifying a legal person, ERGO requests current information from the company register which confirms data on the customer establishment, address, type of activity and indicates natural persons who have the right to represent the customer in business relationships with ERGO.
Why do you ask my personal information?
To comply with the legislation and to meet KYC requirements, ERGO must obtain certain information about the customers and to update it during the business relationship. For this purpose, ERGO may ask for personal information as for starting, as for continuation of the business relationship.
The information about our clients is kept confidential in accordance with insurance secrecy.
Why different financial institutions ask different types of information?
In order to determine the background of their clients, financial institutions may use different approaches and sources of information. ERGO is doing their best to be a reliable partner and collect the essential information which is needed to comply with the Law and regulations.
Who is PEP (Politically Exposed person)?
Politically exposed persons (PEP) are natural persons who currently hold or previously held a prominent public function in any states and/or international institutions.
Information should also be received on the clients related to the PEP and these are:
- Immediate family members of PEP (spouse, person with whom partnership is registered, parents, siblings, children and children’s spouses, children’s partners),
- Close associates to PEP (persons with whom the person runs a joint business or maintains a different work or business relationship).
Here you may find the list of PEP positions: https://www.riigiteataja.ee/akt/124092020004?leiaKehtiv
Who is an ultimate Beneficial Owner (UBO)?
Ultimate Beneficial Owner (UBO) is a natural person
- who, via ownership or other type of control, has the final dominant influence over a natural or legal person, or
- in whose interests, for the benefit of whom or in whose name a transaction or operation is made.
Traditionally, the person who owns, in the form of direct or indirect shareholding, more than 25% of the capital shares or voting stock of the legal person is considered the UBO.
Exchange of tax information – FATCA & CRS
If our client is a tax resident of another country, ERGO has to obtain client’s country of living and submit this data to the Tax and Customs Board. This requirements comes from the EU Directive2014/107/EL, OECD Convention and the procedure on the automatic exchange of information on financial accounts (CRS) CRS (Common Reporting Standard). Also there is an agreement between the Government of the Republic of Estonia and the Government of the United States of America (in the text of the "US"), due to which the Republic of Latvia, Lithuania and Estonia has been required to report on certain accounts of the US Foreign Currency Accounts (FATCA) Law, ERGO obliged to obtain information about the countries of residence of their Clients and provide information about the Client's accounts or assets to the State Revenue Service if the Client is a tax resident of another country.
What is CRS?
CRS ("Common Reporting Standard") is a global standard for the automatic exchange of information on financial accounts. The standard requires financial institutions to identify financial accounts held by clients with a tax residence in another state or jurisdiction other than its own. The objective of CRS is to fight international tax evasion.
The CRS regulation is based on the FATCA regulations, but CRS also differs in significant aspects in comparison with FATCA. The main difference is that CRS encompasses numerous countries and clients compared to FATCA which only covered the United States and account holders who have a tax residency in the United States.
All EU Member States are participating in CRS and have signed an agreement on automatic exchange of financial information (the DAC II directive).
What is the difference between the FATCA and CRS regulation?
In case the client is tax resident in the U.S, i.e. holds a U.S. Citizenship or e.g. “green card”, FATCA (the national laws implementing FATCA) will apply. Under these laws the clients have to provide a self-certification including TIN, etc. FATCA is applicable to both natural and legal persons.
The CRS regulation affects clients with a tax residency other than the ERGO country. The CRS is applicable to both natural and legal persons.
How ERGO is working with CRS?
Common Reporting Standards (CRS) as well as FATCA is part of Know Your Customer principles. ERGO ask customers questions regarding Tax residence countries and respective TIN numbers when, for example, issue a new policy.
According to the provided information, ERGO able to identify customers that are subject of reporting to the local tax authority.
What is a TIN?
The term Taxpayer Identification Number (TIN), or similar, is a unique combination of letters or numbers assigned by a jurisdiction to an individual or an entity for tax administration purposes.
What does the term ‘Tax Residence’ means?
The term ‘tax residence’ means that a person is resident in a country (tax residence) for tax purposes in accordance with internal law.
What actions are required from client who is tax resident in a country other the ERGO country?
The client needs to answer the questions asked by ERGO, If the client is liable to tax in one or more countries other than the ERGO country, we might ask the client to fill out a self-certification. In this self-certification the client should provide tax residencies and TIN(s) ("Taxpayer Identification Number").
What happens if customer fails to submit the required data?
Please be aware that if customer does not provide the required information, the financial institution is obliged to submit data of the person to the State revenue service.
Please be advised that ERGO does not have right to give you any FATCA and CRS related tax advice. If you have tax related questions, please contact a tax specialist, or visit the webpages www.irs.gov (FATCA) and www.oecd.org/tax/ (CRS).