Know your client news 19/06/09 Smaller firms unaware of anti-money laundering screening obligations

According to a survey undertaken by the Financial Crime and Intelligence department of the Financial Services Authority (FSA), smaller financial services firms may be failing to satisfy their financial screening and anti-money laundering obligations.

The report suggests that two thirds of small to medium enterprises (SMEs) are unaware of the difference between HMRC screening and their own customer due diligence procedures, with many wrongly believing that they had no screening responsibility and some failing to understand relevant terminology.

FSA visits indicated that only a fraction of those who claimed to operate written procedures did, in fact, have such policies in place, and those that did so had not identified any suspicious activity, suggesting that the procedures that are in place are not effective. The survey also discovered uncertainty regarding the multiple reasons for observing customer due diligence, such as the confusion of Treasury sanctions lists with money laundering databases, which may indicate a failure to provide sufficient anti-money laundering training to relevant staff.

A spokesperson for a screening software firm warned that Many small firms are relying on rudimentary know your customer checks at client take-on only, and have no provision for regular, ongoing monitoring of their customers against Government Sanctions lists, money laundering or terrorist financing databases. He added that SMEs who fail to meet anti-money laundering obligations remain open to both business and compliance risks.

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