Identification and verification under the money laundering regulations: Problems with compliance
| Published date | 01 February 1997 |
| Date | 01 February 1997 |
| DOI | https://doi.org/10.1108/eb024921 |
| Pages | 146-153 |
| Author | Richard Stones |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 5 Number 2
Identification and verification under the
money laundering regulations: Problems
with compliance
Richard Stones
Received: 22nd January, 1997
Lovell White Durrant, 65 Holborn Viaduct, London EC1A 2DY; tel: 0171 236 0066; fax: 0171 248 4212
Richard Stones M.A. (Oxon) qualified as a
solicitor in
1980
and has been a partner in
the international law firm Lovell White
Durrant since 1987. He specialises in
financial services regulation.
ABSTRACT
The paper analyses the identification require-
ments imposed on financial institutions by the
the
related guidance
given by the Joint Money
Laundering Steering Group. The paper seeks
to distinguish between what is actually
required
by law from what is or may
be
good
practice:
it
argues that in some respects the guidance goes
beyond what is legally required. The paper
deals in particular with the operation of the
Regulations where business is introduced to the
financial institution by an intermediary, or
where the applicant for business is an agent,
trustee or a company.
INTRODUCTION
Money laundering, particularly in conjunc-
tion with drug trafficking or terrorism, is a
morally indefensible activity and it is diffi-
cult to object to the principles underlying
the Money Laundering Regulations 1993
(the Regulations). Financial institutions are
likely to wish, for moral and reputational
reasons, to comply with the spirit, as well
as the letter, of the Regulations and much
of the commentary on the Regulations has
reflected this perception. However, institu-
tions are also entitled to a reasonable
degree of certainty as to what is and is not
required of them as a matter of law, parti-
cularly in view of the penalties for non-
compliance, and it is a pity that the
Regulations are in many respects difficult
to construe and apply. This paper seeks to
identify some of the difficulties and to
restate what is in fact required in the cir-
cumstances concerned.
WHAT MUST BE COMPLIED WITH
A UK institution's obligation is to comply
with the Regulations as such.1 However:
— the Regulations are made under the
European Communities Act 1972, and
only have effect to the extent that they
implement the EC Money Laundering
Directive (91/308/EEC: the Directive).
In practice this means that the English
courts may and should look at the
Directive in construing the Regulations
— the Regulations provide that the court
may take account of certain 'guidance'
in determining whether someone has
complied with the identification
requirements (Regulation 5(3)). The
principal relevant guidance in this
connection is constituted by the various
Journal of Financial Regulations
and Compliance, Vol. 5, No. 2,
1997.
pp. 146-153
© Henry Stewart Publications,
1358-1988
Page 146
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