We know our customers
As a trusted financial partner, we consistently and publicly disclose information about ourselves (e.g. financial results). In the same way, it is important for us to obtain accurate and up-to-date information from our clients in order to provide the best client experience and fulfil legal obligations. Following the Know Your Client (KYC) principle is essential for understanding who our clients are, who are connected to them, and what banking services they require.
Our requirements come from legal provisions such as:
- Money Laundering and Terrorist Financing Prevention Act
- Credit Institutions Act
- Tax Information Exchange Act
- International Sanctions Act
In order to fulfil these legal obligations, we may require additional information about a specific transaction (including the origin of money, sources of funds, reason for the transaction or any other relevant details that help us understand our clients’ activities. We require that any data or documents provided are in either Estonian, English or Russian or may ask the client to have the content of the documents officially translated.
Good to know
It's important for us to strike a balance between offering personalized services to our clients while also complying with legal requirements and protecting clients from potential fraud and financial loss. Requesting additional information from clients can help build a more comprehensive understanding of their financial needs and tailor offerings to fit those needs. Detailed questions about transactions, transfers, and limit changes can help detect potential suspicious activity and prevent fraud. By asking these questions and monitoring for suspicious activity, banks can help protect their clients from financial harm.
Understanding the source of a client's income and the origin of funds used in transactions is a key component of anti-money laundering (AML) and counter-terrorist financing (CTF) regulations.
If you receive a request, please provide all relevant information and supporting documents to help us understand the source of the funds. Examples of supporting documents may include bank statements from other banks, contracts for the purchase or sale of property, loan agreements, declaration of tax return, inheritance documents, etc.
We are committed to protecting your assets and data, and your cooperation in keeping your details up to date is essential for this purpose. This way, we can ensure the security of your accounts, prevent malicious activity, report suspicious transactions, and thereby protect you from potential financial loss.
In order to do that, we need you to check and update your details at least once a year, and whenever you change your place of residence, phone number, or email address. This allows us to contact you quickly in case of need - for example, to verify payment details or to make sure you are the one making a transaction with your bank card abroad.
You can update your details in your internet bank or mobile app.
Banks are obligated to identify politically exposed persons who hold prominent public positions or roles and are therefore considered to be at a higher risk of being involved in corruption or financial crime.
Politically exposed person (PEP) is an individual who performs, or has performed in the past year, an essential function of public authority. Relatives and close associates (RCA) of a PEP are also considered to be politically exposed persons.
- Relative is a person considered as equivalent to a spouse or common-law spouse, children, parents, and their spouses or persons considered as equivalent to spouses.
- Close associate is a person who is a beneficial owner of a business together with a PEP, has a close business relationship with a PEP, or is a beneficial owner of a business created for the benefit of a PEP.
The list of positions that are considered politically exposed can be found on the website of the Estonian Banking Association.
We collect information on beneficial owners to prevent money laundering and terrorist financing, as well as to fulfil our obligations under the Tax Information Exchange Act.
Beneficial owner is an individual who ultimately has ownership or control over a natural or legal person or in whose interest, favour or on whose behalf a transaction is carried out.
A beneficial owner is an individual who:
- has a direct shareholding in the company, i.e. owns at least 25%;
- has an indirect shareholding in the company, i.e. owns another company or companies with a combined shareholding of at least 25%; or
- has a controlling influence over the company by any other means, regardless of the size of the shareholding, voting rights or ownership interest, or the direct or indirect nature of such control.
In case it is impossible to identify the beneficial owner through direct or indirect ownership or ultimate control, the beneficial owner will be identified as a member of the highest governance body, i.e. either:
- the chairman of the company’s management board or supervisory board;
- in their absence, all the members of the management board or supervisory board. In case there are more than five members, the ones with the highest representative rights are indicated (information available on the extract of the company register); in case of a supervisory board, the beneficial owners are those up to five members of the supervisory board who:
- participate in the strategic decision-making of the company; and
- have an impact on the day-to-day activities, transactions, and financial relations of the company.
In most cases, private individuals are considered the ultimate owners of the assets and transactions in their account. However, there may be certain situations, where ownership and control may be shared or transferred to another party in which cases we need to be informed.
Unless exempted by law, information on beneficial owners must be provided by all clients.
The guidelines on identifying beneficial owners can be found on the website of the Ministry of Finance.
TEKSA is a database of beneficial owners in the Estonian Commercial Register.
We are obliged by law to compare the information on ultimate beneficial owners (UBOs) provided by a legal entity with the UBO information in TEKSA. This comparison is necessary both when establishing the client relationship and during applying subsequent due diligence measures. In the event that the UBO information provided differs from the UBO information in TEKSA, we are required to notify the client and request that they ensure both databases contain the same up-to-date and correct information If the client fails to make necessary corrections, we are obliged to report the discrepancy to the Commercial Register. The Commercial Register will then add discrepancy flags to the company’s data in TEKSA and we will have the legal obligation to terminate the cooperation with the client.
The required information on the UBO includes:
- full name
- date of birth
- Estonian personal identification code (in case of Estonian citizens and long-term residents)
- residential address
- country of birth
- tax residence
- tax identification number
- the nature and extent of control exercised over the company (e.g. direct or indirect shareholding or control exercised as a member of the highest management body of the company).
It is important to keep the UBO information accurate and up-to-date both with LHV and in the Commercial Register in order to avoid misunderstandings and inconveniences. Any changes to the UBO should be reported as soon as possible.
To ensure compliance with regulatory requirements and mitigate the higher risks associated with clients operating in high-risk business sectors, we apply enhanced due diligence measures. This means we invest more resources than usual in verifying the identity of the client, understanding their business operations and the source of their funds, and continuously monitoring their transactions for any suspicious activity. Given the additional resources required for managing high-risk clients, we have a special rate for legal entities operating in such sectors. which is expressed in the account opening fee and monthly management fees.
As part of the exchange of tax information, we are obliged to ask and our clients are obliged to provide information about their tax residence. It is common practice for financial institutions to collect and exchange tax-related information with relevant tax authorities as part of efforts to prevent tax evasion and promote tax compliance. We have an obligation to request and obtain information from our clients about their tax residence and share this information with the Estonian Tax and Customs Board if the client is a foreign tax resident.
As a bank, we are required to comply with the CRS (Common Reporting and Due Diligence Standard) and FATCA (Foreign Account Tax Compliance Act) reporting standards. This involves collecting and reporting information about our clients’ financial accounts (including personal details, contact details, payment account details, deposit and securities details and tax residency information.) to the Estonian Tax and Customs Board. As part of our FATCA reporting obligations we are required to identify and report US tax residents, as part of our CRS reporting we are required to provide information on the financial accounts of EU residents as, and as part of our OECD reporting to provide information on tax residents in the rest of the world (excluding the EE, US, EU).
The reason we need information about our clients’ tax residences as well as their tax identification number (TIN) is to comply with these reporting standards to ensure that we are meeting our legal obligations and helping to prevent tax evasion and money laundering.
We are onboarding private customers and companies with a connection to Estonia.
In case of a private person, among other things, the connection to Estonia can be established if:
- they work or study in Estonia;
- they have an Estonian residence permit or right of residence;
- they have family members in Estonia;
- they own a business or real estate in Estonia;
- they are an Estonian taxpayer;
- they have other significant and verifiable links to Estonia.
In case of a company, among other things, the link to Estonia can be established if:
- they have jobs in Estonia;
- they have an office and/or warehouse in Estonia;
- they have invested in Estonia;
- they provide services that take place in or are directed at Estonia;
- they have their main business partners in Estonia;
- they have their management board or owners in Estonia.
International financial and trade sanctions imposed by Estonia, the European Union, the United Nations, the United States, and the United Kingdom are designed to restrict the activities of certain individuals, organizations, or countries, and typically prohibit them from accessing funds, financial services, economic resources or properties.
In order to comply with international financial sanctions laws, it is necessary to identify situations where sanctions apply, and to take appropriate measures to ensure that no prohibited activities take place. This may include requesting additional information or documentation from clients about their counterparties and transactions, as well as conducting due diligence and risk assessments to ensure that sanctions are not violated.