The Bank of Algeria has approved strict measures to reshape how banks and financial institutions interact with customers, according to Circular number 04-2026, issued on April 30, 2026. The new approach mandates an expanded and proactive 'Know Your Customer' (KYC) methodology for financial institutions in Algeria. Verification and monitoring of customers will now be continuous, occurring before, during, and after any financial relationship, ensuring ongoing oversight.
The circular, signed by the Governor of the Bank of Algeria, Mohamed Al-Amin Labbou, precisely defines these KYC procedures. These new requirements apply to all banks, financial institutions, and Algeria Post financial services. Circular number 04-2026 entered into force immediately upon its signing date.
New KYC Framework Details
The new framework outlines procedures for the identification and verification of customers, including permanent and occasional clients, agents, legal representatives, individuals acting on behalf of customers, and beneficial owners. Financial institutions are now obligated to conduct identity verification before entering into any business relationship, throughout its duration, and when executing any occasional transaction. These enhanced Know Your Customer (KYC) procedures specifically require institutions to identify the customer's identity, address, legal representative, and beneficial owner.
The framework also mandates the identification of the customer file, the purpose of the business relationship, and its nature to determine the final risk level associated with the client. KYC procedures necessitate collecting all necessary documents based on the customer category, verifying these documents in person, and signing all documentation required for opening the relationship. Institutions must also conduct an initial monitoring phase to ensure the completeness of documents and their consistency with the customer file.
Data collected from customers is to be entered into an information system designed for automatic risk level determination through programmed assessment models. Independent oversight via a back office is required to ensure the accuracy of this data. The director or head of the post office must monitor adherence to these new procedures. For individuals, identification procedures include collecting basic data such as name, surname, date and place of birth, nationality, address, profession, source of funds, and expected financial flows. Verification requires valid official documents with a photograph, address verification, and matching against national and international sanctions lists. For minors, the framework specifies that data of the legal guardian or custodian must be collected, with the possibility of using a birth certificate.
Risk-Based Approach and PEPs
The Bank of Algeria's new regulations include Politically Exposed Persons (PEPs) under strict monitoring, requiring financial institutions to verify their sources of wealth. A risk-based approach is now mandated for all financial entities, which must consider various factors such as customer types, the products and services offered, distribution channels, and geographic areas. Institutions are obligated to identify, assess, and mitigate risks associated with money laundering, terrorist financing, and the financing of weapons proliferation.
For high-risk customers, senior management approval is explicitly required before establishing any business relationship. The verification process also includes checking the status of individuals identified as Politically Exposed Persons. The circular stresses the importance of understanding the business relationship, particularly concerning the purpose of account opening, the types of transactions expected, and the origins of funds. Financial institutions must also assess the economic and financial profiles of their customers.
Risk assessments are to take into account the nature of the customer, high-risk products like cash operations, accounts designed to obscure identity, and international transactions, as well as geographic risks, including those countries classified as high-risk by the Financial Action Task Force (FATF). Indirect distribution channels also factor into this assessment. Customers will be classified into low, medium, or high-risk categories, with appropriate measures applied to each level. Stricter measures for PEPs involve obtaining senior management approval before any business relationship commences, verifying their sources of funds and wealth, and continuously monitoring their operations. All operations conducted by PEPs must be recorded in special registers. The immediate reporting of any suspicious operations involving PEPs to the Financial Information Processing Unit is mandatory.
Legal Entities and Special Cases
The new regulatory framework classifies "freelance" work under the category of natural persons within the financial system. For legal entities, procedures mandate the collection of specific data, including the entity's name, legal form, address, tax and statistical identification numbers, statutes, and licenses. Institutions must also gather the commercial register, the identities of officials, shareholders, and beneficial owners.
Further information required for legal entities encompasses their main and secondary activities, alongside expected financial flows. Identification of the beneficial owner necessitates legal documents or any instrument capable of tracing the individual effectively controlling the entity. Financial institutions are also required to reference the beneficial owner registry and verify legal entities against international and national sanctions lists.
Associations and non-profit organizations are subject to the same audit rules as other entities. For associations, data collection includes their statutes, general assembly minutes, officials' identities, financial reports, activity projects, sponsorship contracts, donations, and auditor reports. The Bank of Algeria's circular specifies that occasional customers must adhere to the same caution and due diligence regulations as permanent customers.
Ongoing Monitoring and Reporting
The circular implements provisions of Regulation No. 24-03, dated July 24, 2024 (corresponding to Muharram 18, 1446 AH), which concerns the prevention and combating of money laundering, terrorist financing, and financing the proliferation of weapons of mass destruction. Financial institutions can refuse to enter a business relationship if identity cannot be verified, documents are refused, there is a clear contradiction between declared activity and operations, or the customer is on sanctions lists. Refusal decisions must be documented and reported to the Financial Information Processing Unit when necessary.
Continuous monitoring of operations is required to detect unusual activity. Data updates are periodic: every five years for low-risk customers, every three years for medium-risk, and annually for high-risk clients. Immediate re-verification is required upon any significant change in customer status or activity, and institutions must re-verify identity with each file update. Financial institutions are obligated to disclose and report suspicious transactions. Any activity inconsistent with the customer's file is subject to investigation and may lead to immediate reporting to competent authorities.
