Know your way

Superficial KYC is to KYB (know your customer’s business) what a leisure break is to extended independent travel through the same territory. It is all too easy to tick off the main sights and believe that one has gained an adequate understanding of the country; true insight though results from careful reflection, observation and questioning, an approach that finds favour with the Financial Services Authority in Discussion Paper 22 “Reducing money laundering risk”. A tried and tested method to prepare for a journey is to listen to as many of those who have already passed or who intend to follow the same route as possible. The Securities Institute’s Money Laundering Prevention Update Forum 2003 earlier this year and WestLB and Westdeutsche ImmobilienBank’s joint money laundering seminar more recently offered valuable opportunities to learn more about the risk-based approach to customer due diligence and what it means to be suspicious. Timon Molloy reports.

Starting out

There are two fundamental choices in anti-money laundering (AML) Antony Whitehouse, Head of UK Money Laundering Prevention at WestLB Group, observed in his opening remarks at the Securities Institute’s Money Laundering Prevention Update Forum 2003.The firm may decide either that it is determined to protect itself and detect and deter criminals - the “in depth approach” - or it may opt to do the minimum necessary to comply with the regulations, the “no frills approach”. Mr Whitehouse noted that it is not that hard to argue that you comply with the current Joint Money Laundering Steering Group (JMLSG) Guidance Notes since they are loose enough to provide of fairly wide interpretation.This lack of precision can feed through to the Financial Services Authority’s stance on due diligence requirements and there is therefore scope for negotiation with the regulator.The absence of prescription, when combined with rigid box-ticking mentality and full exploitation of opt-outs, can produce narrow and ineffective compliance.The alternative is to view the Guidance Notes as just that, ie, guidance, a starting point for developing a more thoughtful and thorough methodology in which documentation and data are used to assemble a context for customer and transaction and “not just paper for paper’s sake”, said Mr Whitehouse.