Know your customer

In its day-to-day operations, SEB Pank follows applicable laws and the principles of good practice. It is important for us to be a reliable bank for both new and existing customers. In order to provide the best service and ensure the reliable operation of the financial sector, SEB follows one of the main principles and obligations of banking: Know Your Customer.

In accordance with the Estonian Money Laundering and Terrorist Financing Prevention Act and other laws applicable in the European Union, credit institutions operating in Estonia are obligated to identify their customer as well as to collect, verify, and regularly update customer data. Customer data has to be accurate and up to date.

It is natural for business operations and associated persons change over time. Therefore, we will contact you at certain intervals to update your data; among other things, we need information on ultimate beneficial owners and the content of economic operations. For the sake of clarity, we might ask you additional questions during the conclusion of an agreement and at other times during the validity of the agreement or ask you for documents verifying the data. Having this information makes it easier for the bank to identify and prevent suspicious transactions in accounts, thereby protecting the funds of customers and preventing possible financial crimes, money laundering, terrorist financing, or ignoring sanctions.

We hope for your cooperation and understanding and ask that you give clear answers to any requests for data. We will do our best to avoid unreasonable delays in making transactions and providing services.

All data submitted by the customer is confidential and we may transmit it only in cases provided by law.

We are obliged to collect customer data in accordance with requirements set out in international and local laws, which regulate the implementation of the Know Your Customer principle. The customer data questionnaire is one of the means that allows us to collect the relevant data. This is filled out prior to initiating cooperation with the customer and is the basis of continuing this cooperation. The frequency of updates depends on various factors, but as the customer data expires, we notify our customers of this regularly, using every available channel (messages in the Internet Bank, text messages, automated calls, emails, regular mail).

Collecting data from customers is not an exception for SEB and for Estonian financial institutions, but a global trend. Collecting pertinent customer data helps us to identify and prevent suspicious transactions in bank accounts and protect the funds of customers.
 

Prior to establishing a business relationship with a customer, we must understand the purpose of opening a bank account and verify the source of income and predicted transactions. In some cases, when the bank does not have sufficient data, the customer is asked to provide an employment agreement, partner agreements, or documents verifying their place of residence or employment.

• You can update the customer data form for private customers by logging into the Internet Bank (Settings --> My data).
• You can update form for business customers by logging into the Internet Bank (Settings --> Additional business information).
• You can also fill out the questionnaire at a branch office of the bank, via a video call, and, in the case of private customers, also via a phone call.

The customer data can be updated by the customer themselves (a board member in the case of a legal person) or an appropriately authorised person.

Customer data forms can be submitted in Estonian, Russian, or English.

Updating data in the Internet Bank for private individuals
Updating data in the Internet Bank for Business

It is very important for SEB Pank to be reliable and offer the best service. In order to offer the maximum support to our customers in various situations, protect them, and ensure their security, we need to know how to contact them in the fastest way.

Our operations are based on applicable laws and the principles of good practice, which obligate us to identify our customers, collect and verify data, and update this data regularly.

Data on tax residency gives us knowledge about the country that the person pays their taxes in. An Estonian tax resident is a person who has stayed here for at least 183 days during 12 consecutive months and regarding whom the Tax and Customs Board has confirmed on the basis of an application that the country of tax residency of the person is Estonia. Upon leaving the country, the person has to submit an application to the Tax and Customs Board. The tax residency code for a private customer in Estonia is their personal identification code and for a business customer, their registry code.

Data on tax residency is required according to the CRS and FATCA regulations, which are mainly aimed at preventing tax evasion and double taxation. Tax evasion causes budgetary loss and infringes the fair taxation principle, and national measures alone are not sufficient to prevent this.

In April 2014, Estonia and the US concluded an intergovernmental agreement that obliges Estonia to submit data to the US about tax residents of the US residing in Estonia. This intergovernmental agreement is based on the Foreign Account Tax Compliance Act of the US, also known as FATCA, which was adopted in 2010 and requires financial institutions all over the world to determine which of their customers are taxable persons in the US.

In order to fulfil the FATCA agreement, Estonia has adopted the Tax Information Exchange Act.

As of 1 July 2014, all financial institutions are required to ask their customers whether they are taxable persons in the US. Legal persons must additionally state whether their ultimate beneficial owners are taxable persons in the US or US citizens.

Taxable persons in the US include US citizens and tax residents as well as persons that have the right to reside in the US at any time (green card).

We kindly ask legal persons to disclose the tax residency and citizenship of the ultimate beneficial owner of the company. If the ultimate beneficial owner is a US tax resident or citizen, we kindly ask to disclose the US federal taxpayer identification number (TIN) of the ultimate beneficial owner.

We kindly ask the taxable persons in the US (both natural and legal persons) to fill out a form developed by the US Internal Revenue Service (IRS), to which the person’s TIN (taxpayer identification number) must be added. The customer receives this number from their US tax authority.

Estonian financial institutions have the obligation to submit information on taxable persons in the US (incl. data on the account holder, tax residency, and the account balance) to the Estonian Tax and Customs Board, which, in turn, will submit this data to the IRS within the exchange of tax information.

Please note that if the customer does not submit the required data, the financial institution is obliged to disclose the person’s data to the Tax and Customs Board.

Additional data on FATCA can be found on the website of the Estonian Ministry of Finance and the website of the US Internal Revenue Service.

As with the US, Estonia also exchanges tax information with the European Union (EU) Member States and OECD countries.

Data exchange with OECD countries is based on the Convention on Mutual Administrative Assistance in Tax Matters, which Estonia signed on 29 May 2013.

Tax information exchange within the EU is based on the Council Directive 2014/107/EU of 9 December 2014. This Directive amends Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation based on OECD standards.

Tax information exchanged with EU Member States and OECD countries is similar to that exchanged with the US. The legal basis of data collection and exchange is set out in the Tax Information Exchange Act.

Tax information exchange with EU Member States and OECD countries began in 2017, but data collection started in 2016.

We kindly ask our customers to fill and sign a customer data sheet that contains questions necessary for exchanging tax information – for example, we ask private persons to submit data on their tax residency (residencies) and legal persons on the tax residency (residencies) of their ultimate beneficial owners; we also need to know the place of birth of the ultimate beneficial owners.

Additional information on tax-related data exchange within the EU and between OECD countries can be found on the website of the Estonian Ministry of Finance, the information sheet (PDF, EST), and the website of OECD.

An NFFE will be regarded as an Active NFFE if it meets any one of the following: 

• Less than 50 per cent of the NFFE’s gross income for the preceding calendar year or other appropriate reporting period is passive income and less than 50 per cent of the assets held by the NFFE during the preceding calendar year or other appropriate reporting period are assets that produce or are held for the production of passive income; 
• The stock of the NFFE is regularly traded on an established securities market or the NFFE is a Related Entity of an Entity the stock of which is traded on an established securities market; 
• The NFFE is organised in a US Territory and all of the owners of the payee are bona fide residents of that US Territory; 
• The NFFE is a non-US government, a government of a US Territory, an international organization, a non-US central bank of issue, or an Entity wholly owned by one or more of the foregoing; 
•  Substantially all of the activities of the NFFE consist of holding (in whole or in part) the outstanding stock of, and providing financing and services to, one or more subsidiaries that engage in trades or businesses other than the business of a Financial Institution, except that an NFFE shall not qualify for this status if the NFFE functions (or holds itself out) as an investment fund, such as a private equity fund, venture capital fund, leveraged buyout fund or any investment vehicle whose purpose is to acquire or fund companies and then hold interests in those companies as capital assets for investment purposes; 
• The NFFE is not yet operating a business and has no prior operating history, but is investing capital into assets with the intent to operate a business other than that of a Financial Institution; provided, that the NFFE shall not qualify for this exception after the date that is 24 months after the date of the initial organisation of the NFFE; 
• The NFFE was not a Financial Institution in the past five years, and is in the process of liquidating its assets or is reorganising with the intent to continue or recommence operations in a business other than that of a Financial Institution; 
• The NFFE primarily engages in financing and hedging transactions with or for Related Entities that are not Financial Institutions, and does not provide financing or hedging services to any Entity that is not a Related Entity, provided that the group of any such Related Entities is primarily engaged in a business other than that of a Financial Institution; 
• The NFFE meets all of the following requirements:
  • It is established and maintained in its country of residence exclusively for religious, charitable, scientific, artistic, cultural, or educational purposes;
  • It is exempt from income tax in its country of residence; 
  • It has no shareholders or members who have a proprietary or beneficial interest in its income or assets; 
  • The applicable laws of the Entity’s country of residence or the Entity’s formation documents do not permit any income or assets of the Entity to be distributed to, or applied for the benefit of, a private person or non-charitable Entity other than pursuant to the conduct of the Entity’s charitable activities, or as payment of reasonable compensation for services rendered, or as payment representing the fair market value of property which the Entity has purchased; and 
  • The applicable laws of the Entity’s country of residence or the Entity’s formation documents require that, upon the Entity’s liquidation or dissolution, all of its assets be distributed to a governmental Entity or other non-profit organization, or escheat to the government of the Entity’s country of residence or any political subdivision thereof.
• Any NFFE within the definition of an Excepted NFFE in US Treasury Regulations.

A Passive NFFE is any NFFE that is not: 

• an Active NFFE or 
• a Withholding Foreign Partnership, Withholding Foreign Trust, or a Qualified Intermediary pursuant to relevant US Treasury Regulations.

The bank has a legal obligation to identify politically exposed persons, their family members, and close associates.

The PEP status of a person does not mean that a bank account should not be opened for them or that the services provided to the customer should be limited. This is an obligation of the bank to apply enhanced due diligence to the politically exposed persons.

Additional information and a list of the authorities performing prominent public functions is provided in the PEP section of the customer data page for assistance.

The bank is legally obliged to collect data on business relationships, including the purpose of the customer relationship and the source of assets. The area of activity, the employer, and the position are a part of this data.

The bank must ensure that the customer’s money is not associated with illegal activities, as well as understand how the funds are acquired and what the source of the funds used in a particular transaction is.

Minors are also obliged to fill out the customer data form. Until the child turns 7 years old, their account can be opened and used only by their legal guardian. Starting from 7 years of age, the child can make transactions on their own, provided that their parent or legal guardian has given them the right to use the account on their own.

Data on children can be updated by their legal guardian via video call, phone, or on the customer data form.

Data on the customer’s accounts in other banks helps us to identify which transactions are standard and which are atypical. This, is turn, helps us understand the type of cash flow that the bank account in SEB is used for (employment income, investments, etc.).

Due to implementing due diligence, SEB Pank considers legitimate interest and a connection to Estonia prerequisites for entering into a contractual relationship. This information is provided in the general terms and conditions of the bank.

In accordance with laws and regulations and the Know Your Customer principle, we might ask for additional documents, information, and clarifications upon concluding or continuing an agreement (e.g. confirmation on living, working, or studying in Estonia or data on the residency of the owners and on the business operations for companies).

Banks have the obligation to verify the source of their customer’s assets. In some cases, this might mean that you need to submit documents to the bank proving the source of the assets. This applies to both initiating a customer relationship and carrying out transactions.

It is common to ask questions from customers and they may be asked from any customer of the bank.

If questions arise or shortcomings are detected in the course of monitoring transactions, we ask the customer to provide further details and submit additional documents. Therefore, it is crucial to update customer data and submit relevant and correct information, e.g. notify of a change of company’s CEO or shareholder, field of activity (occupation), turnover, or changes in place of residence (place of business). If we have accurate and up-to-date data, it is easier for the bank to ensure the security of the customer’s account and prevent possible illegal or suspicious transactions.

Enquiries are dealt with as quickly as possible, but we kindly ask that customers remain patient depending on the situation. The security of information related to enquiries is ensured and described in the section on data safety.

The bank will evaluate the basis of making the money transfer and the business relationship of the payer and the payee based on the explanation of the transfer. Therefore, we kindly ask that you specify the purpose of the transfer as clearly as possible, avoiding indecent phrases and allusions to illegal actions.

We need this information to understand the customer’s operations and cash transactions and to predict the expected financial conduct. This also helps to analyse which financial transactions are standard for the customer and in accordance with their declarations to prevent possible financial crimes and loss of customer funds. If the expected turnover or the nature of the transaction is significantly different from reality, the bank may ask additional questions and require the customer to update their customer data.

Collecting data on receipts, transfers, and cash turnovers is not associated with transaction limits set for the customer.

The more complicated the ownership structure of the company, the more likely it is that the bank will ask additional questions about it. The goal of the bank is to understand the business operations of the customer, i.e. how the company is managed and who the ultimate beneficial owners are, and this applies to both initiating a customer relationship and existing customers.

In order for the bank to follow the Know Your Customer principle, it has to be able to name, among other things, the main partners of the customer. Therefore, the customer has to be aware of their partner’s background and operations. Awareness helps to prevent the chance of falling victim to crime or involuntarily becoming a part of illegal schemes.

For example, there is the possibility to describe companies providing or receiving services as your partners.

The bank has to follow legal requirements and know their customers. Submitted data ensures, among other things, that the customer corresponds to the risk appetite of the bank, which states the risks the bank wishes to take and their extent. The main data on the customer is collected from the customer themselves. This is why updating data and responding to enquiries is crucial.

If the customer does not submit the necessary documents or pertinent data despite reminders, it is considered a breach of agreement and the bank has the right to limit the customer’s use of their funds. The funds are not lost for the customer and all services are usable as normal after the necessary data is submitted. The bank has the option to terminate customer relations with uncooperative customers.

SEB Pank follows the good banking practice, cares for its customers and takes measures that can be inconvenient only if there are legitimate reasons for them to be.

All data submitted to SEB Pank is confidential and it is used solely for purposes related to the contract and in cases prescribed by law. We apply the requirements of the laws of the Republic of Estonia and ensure that data submitted to us by customers is in accordance with data protection laws. We issue data only to the customer, their representative, or to government agencies in cases prescribed by the Credit Institutions Act. Personal data collected upon concluding and performing an agreement will be stored for 10 years after the customer relationship has ended.

The relations between the bank and the customer with regard to the banking secrecy and the processing of personal data is regulated by the general terms and conditions of SEB Pank and the terms and conditions for processing personal data of SEB Pank.

Ultimate beneficial owners do not need to be stated in case of the following business groups:

• an apartment or building association;
• a listed company in a regulated market, which is subject to disclosure requirements in accordance with European Union law or similar international standards (excluding, for example, a company listed on the stock market of Russia or India);
• a legal person governed by public law.

The ultimate beneficial owner is a private person,

• who owns the company directly: the person has a holding of more than 25%;
• who owns the company indirectly: the person owns another company or several other companies that have a holding of more than 25% in the company in question; or
• has other means of control over the company: the person affects the company conclusively, irrespective of the amount of shares, parts, the right to vote, or right of ownership or its direct or indirect nature.
• If the ultimate beneficial owner cannot be identified, a member of the senior management is stated as the ultimate beneficial owner, e.g. either
• the chairman of the management board or supervisory board of the company;
• in their absence, all members of the management board or supervisory board. If the management body consists of more than five members, the members with more rights of representation are favoured (the data thereon is located on the B-card of the commercial register); if there is a supervisory board, those five members of the supervisory board are stated as ultimate beneficial owners who
  • participate the most in making the strategic decisions of the company,
  • actually control the daily business, transactions, and financial relations of the company,
  • carry out daily and regular management duties.

In the case of self-employed persons, it is assumed 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 identified, the manager of the branch is stated as the ultimate beneficial owner.

In the case of a non-profit organisation (incl. religious organisations), the chairman of the management board

• is stated as the ultimate beneficial owner or,
• in their absence, those members of the management board that have more rights of representation (the data thereon is located on the B-card of the commercial register).

In the case of foundations, the ultimate beneficial owner is the chairman of the management board or supervisory board or the members thereof.

In the case of investment funds, trust funds, partnerships, communities, or other such entities that do not have the status of a legal person, the ultimate beneficial owner is a private person who

• indirectly or directly owns the entity or
• is in control of that entity in other ways, by being
  • its founder or the person that has submitted their assets to the asset pool;
  • its trustee or the manager or holder of assets;
  • the person ensuring the preservation and control of assets (if such a person is appointed); or
  • its beneficiary (if beneficiary (beneficiaries) will be appointed in the future) or a group of persons in whose interests the entity has been established or operates.

If the ultimate beneficial owner of the fund cannot be unambiguously identified, the members of the senior management are stated as beneficiaries.

In the case of a company owned by the state or local government, the ultimate beneficial owner is

• the bearer of authority of the relevant administrative unit (e.g. the minister, rural municipality mayor, or mayor) or
• members of the senior management of the company.

For example, if 40% of the company is owned by the city and 60% by the rural municipality, the chairman of the management board of the company can be stated as the ultimate beneficial owner.

In the case of a subsidiary of a group, the ultimate beneficial owner may be a member of the senior management of the subsidiary or a person conducting factual control or a person making strategic decisions or a regular manager.

In the case of such discrepancies, the bank is obliged to submit a discrepancy notice to the commercial register. In the case of data discrepancies, we will notify our customers that they need to check the information on the ultimate beneficial owner and update it in the bank or commercial register if necessary. If the obligated party submits a discrepancy notice, the registrar may make a discrepancy note in the commercial register.

SEB Pank states ultimate beneficial owners based on the above-mentioned principles.

The relationship between a customer and the bank is largely based on trust. Information on ultimate beneficial owners is provided to the bank and the commercial register mainly by the customer. If the bank suspects that the provided information is not correct, it has the responsibility to verify circumstances related to the ultimate beneficial owners.