Raising the bar for AML and KYC due diligence

In particular, greater penalties are being proposed for organisations that have not demonstrated they have taken all the appropriate checks to prevent economic crime. This is an important warning to organisations that might currently view anti-money laundering (AML) and know your customer (KYC) checking as onerous and burdensome bureaucracy. Undoubtedly, legal professionals will want to ensure they operate best practice in order to avoid facing investigation for ‘enabling’ organised crime through their services.

Helping the legal sector ensure it has a strong regime around client due diligence is a wealth of data that can be accessed online in minutes. AML due diligence checks should be an important part of any client acquisition process and with so many powerful tools available to make fast and easy checks, there’s no excuse for legal businesses not to carry these out.

Firms also have an obligation to keep customer data up-to-date by regularly monitoring for changes in sanctions status. There are numerous UK businesses on sanctions lists, as well as many consumers who reside within UK borders. The good news is that quick and easy-to-use AML services are now available so that these checks can be carried out using trusted sources of intelligence.

Businesses committed to best practice should use a combination of data to carry out the necessary checks. Data available from Companies House, as well as county court judgments can
be checked against information captured at the client acquisition stage. This data can then be combined with credit agreement information for more rigorous multi-layered checks.

Economic crime does not stand still and the data industry continues to enhance the level of information it provides to businesses to help them better respond. For example, before the end of the year, additional checks against ‘senior political figures’ and HM Treasury consolidated sanctions list will be added as key alerts to our existing AML services.

Of course, every business needs to operate within the bounds of UK law and, outside of legal firms themselves, what steps do legal advisers in organisations need to take to ensure this is achieved? The first step is to make sure that a business is legitimate. Once that is determined, then its ability to meet trading requirements must be verified. These steps should be integral to the client acquisition cycle, without exception.

Details of directors should be checked for any disqualifications. This process should be as routine as checking credit worthiness. Similarly, delivery addresses should be checked to ensure the business operates from the same address as its trading location.

Any organisation should seek to protect itself from the risk of crime, as much as it would from the risk of a debt going bad. If it cannot demonstrate that it has invested in AML and KYC best practice, this could not only threaten profits, but also put the business at serious risk of being prosecuted under the new proposals being considered by the government. SJ

John Marsden is a fraud and identity expert at Equifax UK