When establishing a new relationship involving a legal arrangement such as a trust, the primary and most critical first step in the Know Your Customer (KYC) process is to perform Customer Due Diligence (CDD). For a trust, this fundamentally requires identifying all associated parties to understand the nature and purpose of the account. According to global anti-money laundering standards, this includes identifying the settlor, trustee(s), and the beneficiary or class of beneficiaries. This identification is essential for assessing the risk profile and complying with beneficial ownership transparency requirements before the account can be used for transactions.

A. Documenting the initial transfer is a transactional activity that occurs after the essential CDD of identifying the parties to the trust has been completed.

C. Documenting dividends is part of ongoing monitoring and understanding the source of funds, which follows the initial account setup and identification of the beneficiaries.

D. Monitoring transactions between accounts is an ongoing due diligence measure, not the foundational step required to open the accounts in the first place.

1. Financial Action Task Force (FATF). (2012-2023). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation – The FATF Recommendations. FATF

Paris

France.

Recommendation 10 (Customer Due Diligence): States that financial institutions must identify the customer and verify their identity.

Interpretive Note to Recommendation 10

Paragraph 5(b)(ii): Explicitly requires that for customers that are legal arrangements (like trusts)

financial institutions must identify the settlor

the trustee(s)

the protector (if any)

the beneficiaries or class of beneficiaries

and any other natural person exercising ultimate effective control over the trust. This is a required measure for establishing the account.

2. Financial Action Task Force (FATF). (2014). Guidance on Transparency and Beneficial Ownership. FATF

Paris

France.

Section III

Paragraph 37: Reinforces the requirement for financial institutions to identify the beneficial owners of a customer

specifying that for a trust

this includes the beneficiaries. This identification is presented as a cornerstone of the CDD process.