"Everyone's at risk, so be warned"
By John J. Piccitto
Published
10 September 2001
Money-laundering regulations are being
tightened - just in case your training officer hasn't
told you.
The new UK money laundering regulations
come into effect as of midnight, November 30, 2001.
They make interesting reading for people at all levels
of the financial industry who sign up clients or work
with them on an ongoing basis.
The UK law stresses the importance
of 'Know Your Customer' (KYC) procedures, and makes
the appointment of a money laundering officer imperative
for, among other things, setting up continuing training
programmes for relevant staff.
Following the lead of the 40 Recommendations
of the OECD's Financial Action Task Force on Money Laundering
(FATF), and other previous guidance notes and codes
of practice, it discusses monitoring transactions and
reporting suspicious ones, and lists penalties for non-compliance.
But is the word getting around to
people who need to know? I did a very informal, very
informative survey recently. A US-based friend suggested
to me that rules about money laundering 'apply especially
to you guys over in Europe'. A Londoner reported that
while his company had money-laundering rules in place,
'I can't lay hands on them right now, but I know we
have them'. I have also heard that money laundering
is 'a compliance and not a front-office issue'.
Section 6-1 of Statutory Instrument
1993 No 1933 indicates who carries the can if a company
has committed an offence against the money laundering
laws '…with the consent or connivance of, or…attributable
to any neglect on the part of, any director, manager,
secretary or other similar officer…'. But just
how deep does responsibility go? What happens to the
folks working down on the coal face?
I contacted HM Treasury (the International
Financial Services section responsible for compliance
with money laundering issues) to find out who is in
peril when the situation goes awry. I was told that
the answer is everybody. Account reps, client administrators,
marketing staff, traders, and anyone else who has direct
contact with clients and who can be seen to be involved
in concealing information, or in assisting in such concealment,
is responsible.
The directors of a company that took
no steps to comply with the developing law in the last
decade can expect worse penalties than if they had been
diligent and cautious. Taking all reasonable steps and
exercising due diligence is a specified defence under
the law.
Fortunately, examples of good practice
can be found. For several years, a British bank has
issued laminated cards to staff outlining 'Know Your
Customer' rules. Some of the people I have spoken to
recently at international financial institutions said
that, as a matter of company policy, no business is
transacted until customer identification procedures
are completed.
In the run-up to the finalisation
of the UK law, much effort has been expended to establish
recurring training programmes, some of them computer-based,
to develop in-house workshops, and to organise and publicise
record-keeping and reporting procedures.
Internationally, money laundering
has become a serious issue. Last year, the FATF produced
a 'name and shame' list of 15 countries that were not
taking adequate measures to prevent money laundering.
Early this summer, four of those countries were removed
from the list, but several new names were added. Two
new bills have been introduced into the US Congress,
sponsored by Massachusetts Democrat Senator John Kerry,
and its House of Representatives companion bill.
The Senate Bill has not had a hearing
date set, but a spokesman from Senator Kerry's staff
is hopeful of eventual passage in view of the fact that
the Democrats now have a slim majority on the Senate
Banking committee. Both House and Senate bills emphasise
support for the FATF Forty Recommendations. The UK legislation
is part of the effort of OECD members to deal with the
problem of money laundering on an on-going basis.
The national and international legal
framework to tackle the problem of money laundering
is tightening. Awareness of the problem and the will
to confront the issue seems to be more and more pronounced.
So what's next? A high-profile case? We all hope not.
But, if you are offered a smeared,
photocopied driving licence or fuzzy passport photograph
as proof of the identity of a potential client, or if
an over-eager manager waives the need for identification
of clients through the use of a signed letter stating
that he personally knows the client in question once
too often, have a chat with your company's money laundering
officer.
You do have a money laundering officer,
don't you?
John Piccitto is managing director
of John Piccitto Consulting
