Washing for a Price: Exposure of the Financial Services System
| DOI | https://doi.org/10.1108/eb027219 |
| Pages | 113-114 |
| Published date | 01 April 1999 |
| Date | 01 April 1999 |
| Author | Doug Hopton |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 3 No. 2
Washing for a Price: Exposure of the Financial
Services System
Doug Hopton
The financial services industry is recognised as one of
the prime participants in the worldwide battle
against money laundering. However, this participa-
tion docs expose the industry and the whole financial
services system to a number of problems and dangers.
Many of these dangers arc theoretical and have been
expounded on a number of occasions. Discussion in
this paper is at a more practical level to show
some of the very real and difficult dilemmas
which the financial industry has to grapple with on
a day-to-day basis.
There are three main areas where the financial ser-
vices industry is exposed to problems:
— the take on of new customers;
— the processing of transactions;
— involvement with authorities and other legal
problems.
The take on of new customers is the basis of all the
industry's future relationship with and the foundation
of its knowledge of the customer or client. So what
exactly docs this entail? It is the need to obtain evi-
dence to identify the applicant or new client in accor-
dance with the current guidance given to the industry
and the requirements laid down by the regulators.
This involves two elements: first, obtaining documen-
tary evidence of identity, and secondly, confirmation
of address. This sounds simple and straightforward
but in practice it is one of the most difficult aspects
faced by the financial services industry. In this country
there is no single universally recognised means of
evi-
dencing our identity. Indeed, few people carry any
form of identification document at all with perhaps
the one exception of a driving licence. However, this
is not a document of identification and was not
designed as such although it is widely accepted not
only in the financial services industry but across the
country as a whole. Even if
a
driving licence is taken
as a 'means of identity' it has one major drawback in
that it does not contain a photograph of the holder.
The new photo driving licence, now being issued,
will overcome this aspect but the licence is still not
an officially recognised 'document of identity'.
These problems of what constitutes satisfactory
identification can leave the financial services industry
exposed to many problems in trying to identify its
new clients. Then there is obtaining confirmation
of their address, which is equally difficult. At a
recent conference, attended by approximately 60
people, the author asked how many of those present
could actually produce satisfactory evidence of iden-
tity. The answer was one who happened to have in
his possession his passport. Yet despite these difficul-
ties the financial services industry is expected to
have its staff achieve identification and confirmation
of address of customers while at the same time
making the applicants for business fell that the institu-
tion does in fact actually want to do business with
them. The institutions are legally required to under-
take these steps, yet there arc many prospective cus-
tomers who for, perfectly legitimate reasons, do not
possess reliable evidence of their identity. This can
lead to the possibility of people being 'socially
excluded' from obtaining financial services, and the
industry is caught in the dilemma of how to prevent
such exclusion yet still meet the requirements of leg-
islation and/or the regulators. In addition, all this
has to be achieved while attempting to provide an
efficient and speedy service to clients. In today's
world there are many people who equate the speed
of service they receive or expect with the quality of
that service — 'If it's not fast it can't be good.'
Unfortunately, to address the problems outlined
above it is not easy to satisfy both demands.
All this has to take place against a background of
financial services now being internationally available
to prospective clients, but where the demands of the
various regulators and the requirements to satisfy
'local law' arc different. Put simply, the playing
field is not level and this can expose the UK financial
services industry.
Assuming the new client has been 'identified' and
the account or relationship has been established,
the problems are now over. If only that were true!
One of the more difficult exposures faced by the
financial services industry involves the processing of
transactions and the reporting of 'suspicions'. Here
Journal of Money Laundering Control
Vol.
3. No. 2,1999, pp. 113-114
© Henry Stewart Publications
ISSN 1368-5201
Page 113
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