Instruction No. 2/2021

Instruction No. 2/2021
BO No. 2/2021 2nd Supplement • 2021/02/26
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Topics
Supervision :: Money Laundering
Mod. 99999911/T – 01/14
Index
Text of the Instruction
Annex I to the Instruction
Annex II to the Instruction
Text of the Instruction
Subject: Low and high risk factors for money laundering and terrorist financing and specific identification and due diligence measures, simplified or enhanced

Law No. 83/2017, of August 18, which establishes preventive and repressive measures to combat money laundering and terrorist financing (“Law No. 83/2017”), provides, in its Articles 35 and 36, for the adoption by obligated entities of simplified or enhanced identification and due diligence measures regarding business relationships, occasional transactions, or operations that identify a proven reduced risk or an increased risk, respectively, of money laundering or terrorist financing. For this purpose, among others identified by the obligated entities or by sectoral authorities, the factors of potentially lower and higher risk are enumerated, exemplarily, in Annexes II and III of Law No. 83/2017. Under the authorization conferred by letter b) of paragraph 3 and paragraph 6 of Article 35, and by paragraphs 1 to 3 and letter b) of paragraph 5 of Article 36, both of Law No. 83/2017, the Bank of Portugal may define the concrete content of the simplified or enhanced measures that prove adequate to address certain reduced or increased risks, respectively, of money laundering or terrorist financing, as well as other indicative situations of potentially lower or higher risk beyond those legally provided for. For its part, Bank of Portugal Notice No. 2/2018, of September 26 (“Notice No. 2/2018”), expressly provides in letters a), b) and c) of paragraph 5 of Article 72, for the possibility of the Bank of Portugal, in the exercise of powers legally conferred upon it, among others, by Articles 94 and 120 of Law No. 83/2017, to complement the lists of factors and types indicative of risk contained in Annexes II and III to Law No. 83/2017 and to define other simplified and enhanced identification and due diligence measures beyond those resulting from Law No. 83/2017 and Notice No. 2/2018.

Instruction No. 2/2021 BO No. 2/2021 2nd Supplement • 2021/02/26 Topics Supervision :: Money Laundering
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Mod. 99999911/T – 01/14
In compliance with the aforementioned regulatory mandates, the Bank of Portugal hereby defines, through this Instruction, other risk factors and specific, simplified and enhanced identification and due diligence measures.
This Instruction also complements the provisions of Article 6 of Notice No. 2/2018, concretizing the incorporation of the Guidelines on risk factors and simplified and enhanced due diligence measures (“JC/GL/2017/37”)1, issued by the European Supervisory Authorities in accordance with Article 17 and paragraph 4 of Article 18 of Directive (EU) 2015/849 of the European Parliament and of the Council, of May 20, 2015, on the prevention of the use of the financial system and the activities and professions especially designated for the purposes of money laundering and terrorist financing. This Instruction was submitted to public consultation, in accordance with Article 101 of the Administrative Procedure Code. Thus, in the exercise of the competence conferred upon it by Article 17 of its Organic Law, by letter b) of paragraph 3 and paragraph 6 of Article 35, by paragraphs 1 to 3 and letter b) of paragraph 5 of Article 36, by paragraph 1 and letter a) of paragraph 2 of Article 94, all of Law No. 83/2017, by paragraph 3 and sub-letter v) of letter b) of paragraph 4 of Article 28, by Article 30 and by letters a), b) and c) of paragraph 5 of Article 72, all of Notice No. 2/2018, the Bank of Portugal determines the following:

Chapter I
Scope of application and general provisions
Article 1
Object
This Instruction complements:
a) The non-exhaustive list of factors and types indicative of potentially lower risk contained in Annex II of Law No. 83/2017, of August 18 (hereinafter, “Law No. 83/2017”), and defines the concrete content of simplified identification and due diligence measures, beyond those provided for in Law No. 83/2017 and in Bank of Portugal Notice No. 2/2018, of September 26 (hereinafter, “Notice No. 2/2018”), giving effect to the provisions of paragraph 3 and sub-letter v) of letter b) of paragraph 4 of Article 28 and letters a) and b) of paragraph 5 of Article 72, both of Notice No. 2/2018; b) The non-exhaustive list of factors and types indicative of potentially higher risk contained in Annex III of Law No. 83/2017 and defines the concrete content of enhanced identification and due diligence measures, beyond those provided for in Law No. 83/2017

1https://eba.europa.eu/regulation-and-policy/anti-money-laundering-and-e-money/guidelines-on-risk-factors-and-simplified-and-enhanced-customer-due-diligence.

Article 2
Scope of application
The norms contained in this Instruction are addressed to the financial entities provided for in Article 3 of Law No. 83/2017, provided they are subject to the supervision of the Bank of Portugal in accordance with the provisions of Articles 86 and 88 of the same legal instrument.

Article 3
Definitions

For the purposes of applying this Instruction, the following are understood by:
a) “Jumbo account”, an account held by the financial entity itself and which it uses on behalf of its clients or counterparties; b) “Jurisdictions associated with a higher risk of ML/TF”, jurisdictions that, based on the assessment of potentially higher risk factors, present a higher risk of money laundering or terrorist financing, including “high-risk third countries”, within the meaning of letter bb) of paragraph 1 of Article 2 of Law No. 83/2017; c) “Pooled account”, an account opened by a client for the holding of funds belonging to its clients, who do not have powers to operate the account; d) “Private banking”, the provision of banking and other financial services to individuals who possess a high net worth, as well as to their close family members and entities controlled by them, including the vehicles they use for holding or managing assets (“asset holding vehicles” and “asset management vehicles”, respectively); e) “Trade finance”, the provision of trade financing services especially used to facilitate the movement of goods at national or cross-border level, notably through the availability of financing instruments that allow reducing the risks incurred by importers or exporters of the traded goods.
Without prejudice to the provisions of the following paragraph, the definitions contained in Law No. 83/2017 and Notice No. 2/2018 are applicable to this Instruction, and the concepts used in this Instruction must be interpreted in the sense attributed to them in those instruments.
For the purpose of this Instruction, the definitions of “close family members” and of “persons recognized as closely associated” provided, respectively, in letters w) and dd) of paragraph 1 of Article 2 of Law No. 83/2017, are applicable, as the case may be, by reference to any client, representative or beneficial owner, even if the status of “politically exposed person” or “holder of other political or public offices” has not been identified for them.

Article 4
Guidelines of the European Supervisory Authorities In compliance with this Instruction, financial entities shall take into account the sources of information provided for in Article 6 of Notice No. 2/2018, in particular, the Joint Guidelines of the European Supervisory Authorities, which establish simplified or enhanced identification and due diligence measures and other factors that must be considered in the adoption of the following procedures:
a) In the assessment, weighting and management of the risk of money laundering and terrorist financing associated with business relationships and occasional transactions; b) In defining the scope of the measures to be adopted under the duty of identification and due diligence, depending on the risk concretely identified.

Chapter II
Factors and types indicative of risk of money laundering and terrorist financing
Article 5
Other indicative risk situations

In complement to the provisions of Annex II of Law No. 83/2017 and Annex II of Notice No. 2/2018, in the analysis of money laundering and terrorist financing risks that may motivate the adoption of simplified measures, financial entities shall take into account the factors and types indicative of potentially lower risk enumerated in Annex I to this Instruction.
In complement to the provisions of Annex III of Law No. 83/2017, in the analysis of money laundering and terrorist financing risks that may motivate the adoption of enhanced measures, financial entities shall take into account the factors and types indicative of potentially higher risk enumerated in Annex II to this Instruction.
In the analysis of money laundering and terrorist financing risks that they carry out under Law No. 83/2017 and Notice No. 2/2018, financial entities shall also consider other situations, factors and types indicative of risk that prove adequate to their specific operational reality.
Without prejudice to cases expressly provided for in Law No. 83/2017 and Notice No. 2/2018, the isolated presence of the factors and types indicative of risk referred to in the preceding paragraphs does not necessarily determine the automatic attribution of a high or reduced risk degree to the business relationship or occasional transaction.
In weighting the risk factors, financial entities ensure that:

Chapter III
Simplified Measures
Article 6
General provisions

In accordance with the provisions of paragraph 6 of Article 35 of Law No. 83/2017 and paragraph 3 and sub-letter v) of letter b) of paragraph 4 of Article 28 of Notice No. 2/2018, financial entities may adopt the simplified measures provided for in the following articles, provided that the specific prerequisites established therein are verified and compliance with the other applicable obligations provided for in Law No. 83/2017, Notice No. 2/2018 and this article is ensured.
The provisions of this Chapter do not prevent the adoption of other simplified measures provided for in Law No. 83/2017, Notice No. 2/2018 or that are defined by financial entities under the regime provided for in sub-letter vi) of letter b) of paragraph 4 of Article 28 of Notice No. 2/2018, including for the situations indicative of potentially lower risk provided for in Law No. 83/2017, Notice No. 2/2018 and Annex I to this Instruction.
Whenever simplified measures are applied, financial entities, in complement to the monitoring provided for in paragraph 7 of Article 35 of Law No. 83/2017, adopt mechanisms that allow verifying, on a continuous basis, the maintenance of a proven reduced risk of money laundering and terrorist financing.
Whenever, in accordance with the provisions of Article 28 of Law No. 83/2017 and Article 27 of Notice No. 2/2018, the risk analysis carried out on the business relationship or occasional transaction justifies an increased degree of knowledge of the client, their representative or beneficial owner, financial entities:
a) Request additional information or elements with the extent adequate to the risk concretely identified; b) Require, also with the extent adequate to the risk concretely identified, a higher level of proof of the identifying elements and information obtained.
The extension of the services or products provided by the financial entity to the client, beyond those covered by the simplified measures provided for in the following articles, does not oblige to the establishment of a new business relationship, but determines the application of the identification and due diligence procedures due in accordance with Law No. 83/2017, Notice No. 2/2018 and this Instruction, at a moment prior to the availability of the new services or products.

Article 7
Payment initiation services and account information services

In the contracting of payment initiation services and account information services referred to in letters g) and h) of Article 4 of the Legal Regime of Payment Services and Electronic Money (“RJSPME”), annexed to Decree-Law No. 91/2018, of November 12, financial entities proceed to the collection and registration of the full name or denomination of the client, their representatives and beneficial owners, and also of the following identifying elements:
a) When they are natural persons:
i) Type, number, validity date and issuing entity of the identification document; or ii) Tax identification number or, if they do not have a tax identification number, the equivalent number issued by a competent foreign authority. b) When they are legal entities, the corporate identification number or, if none exists, the equivalent number issued by a competent foreign authority.
The application of the provisions of the preceding paragraph may only take place when the following prerequisites are met:
a) In the provision of payment initiation services, the financial entity adopts mechanisms that allow ensuring that payment operations are initiated with payment service providers with headquarters or establishment in a Member State of the European Union or in a third country where there is a regulatory and supervisory framework compatible with that provided for in Law No. 83/2017 and Notice No. 2/2018. b) In the provision of account information services, the financial entity adopts mechanisms that allow:
i) Accessing data from, at least, one account held by the client with payment service providers with headquarters or establishment in a Member State of the European Union or in a third country where there is a regulatory and supervisory framework compatible with that provided for in Law No. 83/2017 and Notice No. 2/2018; and

Article 8
Electronic money
Financial entities may apply the regime provided for in paragraph 1 of the preceding article to the provision of services related to the use of electronic money, whenever the following prerequisites are met, cumulatively:
a) The services provided to the client by the financial entity are limited to electronic money products that meet all the risk mitigation conditions specified in letter c) of paragraph 2 of Annex II of Notice No. 2/2018; b) The funds used in the acquisition or loading of the electronic money product originate from an account domiciled in a financial entity with headquarters or establishment in a Member State of the European Union or in a third country where there is a regulatory and supervisory framework compatible with that provided for in Law No. 83/2017 and Notice No. 2/2018.

Chapter IV
Enhanced Measures
Article 9
General provisions

In accordance with the provisions of paragraphs 1 to 3 and letter b) of paragraph 5 of Article 36 of Law No. 83/2017 and letter b) of Article 30 of Notice No. 2/2018, financial entities adopt the enhanced measures provided for in the following articles.
The provisions of this Chapter do not prevent the adoption of other enhanced measures that are defined by financial entities under the regime provided for in paragraph 4 of Article 36 of Law No. 83/2017.
For the purposes of adopting enhanced measures, financial entities define different degrees of high risk that reflect their specific operational reality, contemplating at least the aspects provided for in letter a) of paragraph 2 of Article 14 of Law No. 83/2017, and proceed to their respective review in accordance with the provisions of Article 4 of Notice No. 2/2018.

Article 10
Clients, representatives and beneficial owners

For the purposes of the provisions of letter a) of paragraph 6 of Article 36 of Law No. 83/2017, examples of concrete measures for obtaining additional information about clients, their representatives or beneficial owners are considered to be the collection of information on:
a) The origin and legitimacy of the wealth; b) The legitimacy of the funds involved in the business relationship; c) Their reputation; d) Close family members and persons recognized as closely associated; e) Previously developed activities; f) The number, size and frequency of transactions estimated to be carried out within the scope of the business relationship.
Whenever they carry out additional due diligence to prove the information obtained, in accordance with the provisions of letter b) of paragraph 6 of Article 36 of Law No. 83/2017, financial entities resort to independent and credible sources of information, defining their respective type and number depending on the guarantees of authenticity they offer and the increased risks concretely identified.
In verifying the origin of wealth, financial entities weigh the use of the following means of proof:
a) Income declarations and, where applicable, wealth control declarations; b) Financial statement reports or audit certification prepared by independent auditors; c) Pay slips; d) Certificates extracted from public registers; e) Document proving acquisition by succession; f) Public information, including that from media outlets, provided it is from an independent and credible source.
In situations of increased risk where the client, representative or beneficial owner presents some element of connection with other jurisdictions, financial entities obtain, at least, information on:
a) The relationships they have with those jurisdictions; b) The existence of associated persons who may influence their operations; c) In cases where they have headquarters or domicile in another jurisdiction, the reason why a business relationship is sought to be established or an occasional transaction carried out outside their jurisdiction of origin.
In addition to the reduction of the time interval for updating information in accordance with the provisions of letter e) of paragraph 6 of Article 36, financial entities proceed, at least annually, to the re-analysis of the risk and other elements associated with business relationships to which a higher degree of risk is attributed.

Article 11.
Jumbo accounts
Financial entities that use jumbo accounts ensure the traceability of any operation to or from that account, in terms that allow the identification of the origin and destination of the underlying funds for each operation, whenever necessary.

Article 12.
Pooled accounts

In addition to adopting all due identification and diligence procedures, financial entities treat the clients of the holder of a pooled account as beneficial owners, adopting identification and identity verification measures according to the risk concretely identified.
Whenever they identify a situation of increased risk associated with the use of pooled accounts, financial entities consider adopting the following measures:
a) The obtaining of additional information in compliance with the complementary procedures provided for in Article 27 of Law No. 83/2017, in accordance with the provisions of paragraph 6(a) of Article 36 of the same legal instrument; b) The intervention of higher hierarchical levels for the authorization of the establishment of the business relationship, in accordance with the provisions of paragraph 6(c) of Article 36 of Law No. 83/2017; c) The intensification of the depth and frequency of business relationship monitoring procedures or of certain operations, sets of operations, or products made available, in accordance with the provisions of paragraph 6(d) of Article 36 of Law No. 83/2017; d) The monitoring of the follow-up of the business relationship in accordance with the provisions of paragraph 6(f) of Article 36 of Law No. 83/2017.

Article 13.
Product, service, operation or distribution channel

Whenever they identify a situation of increased risk associated with a product, service, operation or distribution channel, financial entities consider adopting the following measures:
a) Limitation of the number or amount of permitted operations; b) Limitation of use to certain jurisdictions; c) Limitation of use to certain types of clients; d) Limitation or restriction of cash operations; e) Requirement that deposit, loading, redemption or refund operations be carried out through a traceable means, namely through an account opened with a

Instruction No. 2/2021 Official Gazette No. 2/2021 2nd Supplement • 2021/02/26 Supervision Topics :: Money Laundering
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Mod. 99999911/T – 01/14 financial entity or another legally authorized entity that, not being located in a third country of high risk, demonstrably applies identification and diligence measures compatible with those provided for in Law No. 83/2017 and Notice No. 2/2018; f) Parametrization of alerts in conformity with the risk attributed to the product, service or operation, defining and applying rules that allow adjusting the risk of the product, service or operation when associated with high-risk clients.

Financial entities adopt enhanced measures whenever new products, services or distribution channels present increased risks of money laundering or terrorist financing, including the intervention of top management in the approval of their marketing or use.

Article 14.
Private banking

Whenever they provide private banking services, financial entities adopt enhanced measures proportional to the existing risks.
For the purposes of the preceding paragraph, financial entities adopt, at least, the following measures:
a) The obtaining of additional information in compliance with the complementary procedures provided for in Article 27 of Law No. 83/2017, in accordance with the provisions of paragraph 6(a) of Article 36 of the same legal instrument; b) The intervention of higher hierarchical levels for:
i) Authorization of the establishment of the business relationship, in accordance with the provisions of paragraph 6(c) of Article 36 of Law No. 83/2017; ii) Approval of the risk assessment associated with the business relationship and subsequent reviews; c) The reduction of the time interval for the update of information, in accordance with the provisions of paragraph 6(e) of Article 36 of Law No. 83/2017; d) The monitoring of the follow-up of the business relationship in accordance with the provisions of paragraph 6(f) of Article 36 of Law No. 83/2017; e) Re-analysis of the risk and other elements associated with business relationships assigned a higher degree of risk, on at least an annual basis.
Financial entities also consider adopting the following measures:
a) Requirement that cash deposits and other values be made in person and at the counter; b) Intensification of the depth and frequency of monitoring procedures, in accordance with the provisions of paragraph 6(d) of Article 36 of Law No. 83/2017, namely through the definition of thresholds that trigger specific analyses; c) Real-time analysis and monitoring of operations;

Article 15.
Trade finance

Whenever they provide trade finance services, financial entities adopt enhanced measures proportional to the existing risks.
For the purposes of the preceding paragraph, financial entities adopt, at least, the following measures:
a) The obtaining, in accordance with the provisions of paragraph 6(a) of Article 36 of Law No. 83/2017, of additional information on:
i) The clients, their representatives and beneficial owners; ii) The planned or carried out operations; iii) The counterparties of commercial transactions; b) The intervention of higher hierarchical levels for the:
i) Authorization of the establishment of the business relationship, in accordance with the provisions of paragraph 6(c) of Article 36 of Law No. 83/2017; ii) Approval of the risk assessment associated with the business relationship and subsequent reviews.
For the purposes of the preceding paragraph, letter a), examples of concrete measures for obtaining additional information include the collection of elements on:
a) The jurisdictions in which the client conducts business; b) The existence of exchange controls or restrictions on the outflow of foreign exchange in jurisdictions where the client conducts business; c) The trade routes used, including jurisdictions of origin, destination and transit of goods, as well as the ships, ports, air and shipping companies and carrier entities used; d) The goods traded, especially regarding goods with dual use or inconsistent with the declared economic activity; e) Buyers, suppliers, insurance entities, agents and other third parties involved in the commercial circuit, as well as their geographical location.
In verifying the information obtained in accordance with the provisions of the preceding paragraphs, financial entities consider the use, among others, of the following means of proof:
a) Public information, namely that from the International Maritime Office and free container location services of shipping companies;

Article 16.
Geographic location
Without prejudice to the measures applicable to high-risk third countries, provided for in Article 37 of Law No. 83/2017, and to the measures applicable to group relationships and establishments abroad, provided for in Article 22 of the same legal instrument and in Delegated Regulation (EU) 2019/758 of the Commission, of January 31, whenever they identify jurisdictions associated with a higher risk of money laundering and terrorist financing, relevant for certain business relationships or occasional transactions, financial entities adopt the following measures:
a) The obtaining of additional information on the jurisdiction in question, namely on the relevant regulatory framework and the existence of supervision compatible with that provided for in Law No. 83/2017 and Notice No. 2/2018; b) The intensification of the depth or frequency of monitoring procedures, in accordance with the provisions of paragraph 6(d) of Article 36 of Law No. 83/2017, namely taking into account the origin and destination of the transactions.

Chapter V
Final Provisions

Article 17.
Formalization and duty of conservation

The assessments, procedures and measures defined under this Instruction are reduced to writing and integrated into the documents prepared in observance of paragraph 4 of Article 12 and paragraph 3(c) of Article 14, both of Law No. 83/2017, in terms that demonstrate in detail their respective adequacy.
All documents, records and analyses collected or prepared in the context of compliance with this Instruction are subject to the duty of conservation as provided for in Article 51 of Law No. 83/2017.

Article 18.
Entry into force
This Instruction enters into force on the day following its publication.

Annex to Instruction No. 2/2021 Official Gazette No. 2/2021 2nd Supplement • 2021/02/26
Supervision Topics :: Money Laundering
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Annex I to the Instruction
Annex I
(referred to in paragraph 1 of Article 5)
Other potentially lower risk situations
This Annex intends to provide financial entities with an illustrative list of factors and indicative types of potentially lower money laundering or terrorist financing risk that should be considered by financial entities in the analysis of situations that may motivate the adoption of simplified measures, in complement to the provisions in Annex II of Law No. 83/2017 and Annex II of Notice No. 2/2018.

Nevertheless, financial entities may also consider other factors and indicative types of potentially lower risk that prove adequate to their specific operational reality.

Risk factors inherent to clients:
a) Clients with a simple control and ownership structure that allows easy and timely knowledge of information regarding their respective beneficial owners; b) Clients subject to disclosure requirements consistent with European Union law or subject to equivalent international standards, which guarantee sufficient transparency of information regarding their respective beneficial owners, in addition to those mentioned in paragraph 1(a) of Annex II of Law No. 83/2017 and paragraph 1(a) of Annex II of Notice No. 2/2018; c) Clients with assets and investments of reduced amount.
Risk factors inherent to the product, service, operation or distribution channel:
a) Non-complex financial products with low profitability or return; b) Products with limited use or specific and pre-determined purposes, such as:
i) Fixed-term savings products with low savings thresholds; ii) Products whose benefits can only be realized in the long term or for a specific reason, such as retirement or the purchase of a property for permanent own residence; iii) Products made available to certain categories of clients who meet pre-defined circumstances, for example, beneficiaries of social benefits, parents on behalf of their children, or minors until they reach majority;

Instruction No. 2/2021 Official Gazette No. 2/2021 2nd Supplement • 2021/02/26 Supervision Topics :: Money Laundering
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iv) Recurring transfers, namely through direct debit, of identical amount and to the same beneficiary, with apparent economic rationality, including payment of essential minimum services, payment of salaries and contributions to pension funds; v) Products that do not allow cash loading or refunds; vi) Products that can only be used within national territory; vii) Products that can only be used to acquire goods or services, namely when the acquisition of goods or services by their holder can only take place in a limited number of merchants or points of sale and the financial entity has sufficient knowledge of the activities pursued by the merchants; viii) Low-value credit products conditioned on the purchase of a consumer good or service.

c) Pooled accounts held by clients who meet the requirements provided for in paragraph 1(c) of Annex II of Law No. 83/2017, determined in accordance with the provisions of paragraph 1(c) of Annex II of Notice No. 2/2018, and who demonstrate being in a position to immediately provide information and documents regarding their own clients, in compliance with identification and diligence measures compatible with those provided for in Law No. 83/2017 and Notice No. 2/2018. d) Payment initiation services; e) Account information services.

Annex to Instruction No. 2/2021 Official Gazette No. 2/2021 2nd Supplement • 2021/02/26
Supervision Topics :: Money Laundering
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Annex II to the Instruction
Annex II
(referred to in paragraph 2 of Article 5)
Other potentially higher risk situations
This Annex intends to provide financial entities with an illustrative list of factors and indicative types of potentially higher money laundering or terrorist financing risk that should be considered by financial entities in the analysis of situations that may motivate the adoption of enhanced measures, in complement to the provisions in Annex III of Law No. 83/2017.

Nevertheless, financial entities shall also consider other factors and indicative types of potentially higher risk that prove adequate to their specific operational reality.
For the purposes of this Annex, the expression "client" shall be understood as referring, in general, not only to the concept provided for in paragraph 1(d) of Article 2 of Notice No. 2/2018, but also to the client's representatives, including persons authorized to move accounts held by clients of financial entities, as well as their beneficial owners.

Risk factors inherent to clients:
a) Clients that are non-profit organizations and have been identified, in accordance with paragraph 3(a) of Article 145 of Law No. 83/2017, as representing an increased risk of money laundering or terrorist financing; b) Clients resident or conducting business in jurisdictions associated with a higher risk of money laundering or terrorist financing, determined in accordance with paragraph 4 of this Annex; c) Clients with nationality or known passage through jurisdictions associated with a higher risk of terrorist financing or support for terrorist activities or acts; d) Clients with known links to foreign terrorist fighters; e) Clients who conduct economic activities with dual-use goods; f) Clients who conduct economic activities in sectors prone to tax evasion or who are considered, by reputable and credible sources, as having a high risk of money laundering and terrorist financing (e.g., real estate, gambling, transport, auctions, among others); g) Clients who conduct economic activities in sectors frequently associated with high corruption indices; h) Clients who use intermediaries or agents with broad powers of representation, for the purpose of initiating or managing the business relationship, mainly

Instruction No. 2/2021 Official Gazette No. 2/2021 2nd Supplement • 2021/02/26 Supervision Topics :: Money Laundering
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when they are headquartered in jurisdictions associated with a higher risk of money laundering or terrorist financing; i) Clients that are newly created legal entities without a known or adequate business profile for the declared activity; j) Clients that are asset holding or management vehicles ("asset holding vehicles" and "asset management vehicles", respectively); k) Clients who have been subject to administrative or judicial measures or sanctions for violation of the regulatory framework related to money laundering or terrorist financing;

Risk factors inherent to the product, service, operation or distribution channel:
a) Products or services associated with virtual assets; b) Products, services, operations or distribution channels characterized by an excessive degree of complexity or segmentation; c) Cash operations and of high value, especially with the use of high-denomination notes; d) One-off high-value operations, considering what is expected for the product, service, operation or distribution channel used; e) Products without delimited geographical use, even if such is not necessary for the execution of their purposes; f) Credits secured by goods located in jurisdictions that hinder or prevent the obtaining of information regarding the identity and legitimacy of the parties involved (and their respective beneficial owners) in the provision of the guarantee; g) Fund circuits with a high number of intermediaries operating in different jurisdictions; h) E-money products without limitation regarding:
i) The number or amount of permitted payments, loading or refunds; ii) The electronically stored monetary value; i) Operations financed with anonymous e-money, including with the use of e-money products benefiting from the exemption provided for in Article 12 of Directive (EU) 2015/849 of the European Parliament and of the Council, of May 20, 2015; j) E-money products or other pre-paid instruments that allow the transfer of funds between different users; k) The creation or use of asset holding or management vehicles ("asset holding vehicles" and "asset management vehicles", respectively).

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3. Risk factors inherent to correspondent relationships:
a) Correspondent relationships in which the respondent – or the financial group it is part of – has been subject to relevant measures or sanctions for the prevention of money laundering and terrorist financing; b) Situations in which the respondent conducts a significant segment of its business in activities or sectors frequently associated with money laundering or terrorist financing; c) Correspondent relationships with entities holding an "offshore banking license".

Risk factors inherent to geographic location
a) Jurisdictions identified by reputable and credible sources as presenting ineffective judicial systems or deficiencies in the investigation of crimes associated with money laundering or terrorist financing; b) Jurisdictions that do not implement reliable and accessible registries (or other equivalent mechanisms) of beneficial owners; c) Jurisdictions that have not implemented the Common Reporting Standard developed by the Organisation for Economic Co-operation and Development (OECD), regarding the automatic exchange of information; d) Jurisdictions known for offering relevant simplified or non-existent administrative procedures or clearly more favorable privileged tax regimes; e) Jurisdictions with legal regimes that establish prohibitions or restrictions that prevent or limit compliance by the financial entity with the legal and regulatory rules governing its activity, including at the level of the provision and circulation of information.

Instruction No. 2/2021

Lineage: In force