Financial institutions urged to avoid clients with shrouded backgrounds

John Davies, head of ACCA’s technical team, is advising regulated firms to refrain from doing business with clients whose background checks yield insufficient information for a proper due diligence or Know Your Customer (KYC) reviews.

“If you cannot satisfy yourselves about the client identity, do not do business with that client,” said Davies on Thursday at a one-day forum on money laundering in Kingston.

"You need to know what is normal for each of your clients so you can know when something doesn’t look right.”

This advice is one of the Financial Action Task Force (FATF) recommendations aimed at developing policies to monitor and combat money laundering and terrorism financing.

While these recommendations are globally accepted they are enforceable only if they are incorporated into national laws.

Davies listed several situations in which client due diligence is necessary: when they first establish a business relationship with the clent; when clients carry out ad hoc transactions above a particular monetary threshold; when the institution has suspicions about a client and when it doubts the truthfulness of the information provided.

“If the required information is not forthcoming then you don’t know what you are opening up yourself to,” he said. “You could be exposing yourself to money laundering.”

Davies is also advising entities to aim to satisfy themselves about the purpose and intended nature of a new business relationship and also the identity of the beneficial owner of a corporate client.

Further, he said, firms should conduct on-going due diligence and watch out for complex, unusual and large transactions.

Financial institutions should try to keep records of due diligence data for at least five years or the amount of time specified by the regulator, Davies said.

The seminar held at Knutsford Court Hotel titled ‘Tackling Money Laundering: Enhancing the Compliance Regime’ was co-hosted by the Financial Services Commission and the Association of Certified Chartered Accountants.

marcella.scarlett@gleanerjm.com