The overseas lump sum and the nephew's account
Mr Chen, 72, UK resident, applies to open a SIPP and transfer £400,000 from the sale of an apartment in Cyprus. The sale contract is in the name 'Wei Chen', his passport says 'Wei-Hung Chen', and the funds are currently in a bank account in Bulgaria in his cousin's name. He wants to pay in £250,000 from the cousin's account and the remaining £150,000 from a UK account. He also asks that future pension withdrawals be paid to his nephew's UK account because 'he helps me with my affairs'. The platform's screening system returns a possible PEP match against a former Cypriot official with a similar name; the date of birth differs by one year. Mr Chen is impatient, saying another platform will open the account 'within a day', and refuses to provide a notarised translation of the sale contract.
1. What customer due diligence and enhanced due diligence should the platform complete before accepting the £250,000 from the cousin's account?
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The platform must complete standard CDD on Mr Chen - verified identity, address and residency - and enhanced due diligence because the structure is high risk: an overseas property sale, a name discrepancy, funds held by a third party in another jurisdiction and a large lump sum. It should obtain independent evidence of the sale: the full contract, land registry extract, completion statement, bank statements showing the proceeds and a certified translation. The name discrepancy must be explained and corroborated, not simply noted. The cousin is a third-party payer, so the platform needs the cousin's identification, the relationship, the reason for the payment and evidence of the cousin's source of funds. The £150,000 from the UK account also needs source-of-funds evidence. If the client refuses the translation or the evidence is inconsistent, the platform should not proceed and should consider an internal SAR. A same-day opening promise is not a reason to shortcut CDD.
2. How should the possible PEP match be handled?
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A screening hit is not a finding of guilt. The platform should investigate: compare full name, aliases, date of birth, nationality and address; check publicly available information and the client's explanation. If the match is a false positive, the platform should record the rationale and retain the evidence. If Mr Chen is a PEP or a family member or close associate of one, enhanced due diligence is required, including senior management approval, establishing source of wealth and source of funds, and enhanced ongoing monitoring. The one-year date-of-birth difference is a strong discriminating factor but is not conclusive on its own. The platform must not tell the client that a SAR has been made or is being considered, because that could amount to tipping off. It can ask for information needed to complete CDD without disclosing any suspicious activity report.
3. Can the platform accept instructions to pay withdrawals to the nephew's account?
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Generally, pension withdrawals should be paid to an account in the client's own name. A standing instruction to pay a third party is high risk: it can facilitate fraud, coercion or money laundering, and it may leave the client without control of the funds. The platform should require a documented rationale, evidence of the nephew's role - for example a lasting power of attorney or deputy order if Mr Chen lacks capacity - and MLRO or senior sign-off. A bare assertion that the nephew 'helps with my affairs' is not enough. If the platform is not satisfied, it should decline the third-party payment instruction and offer to pay to Mr Chen's verified account. It should also consider safeguarding concerns and whether a capacity assessment or other support is needed. Any suspicion should be escalated internally without tipping off.