ICT Views


Is your client a money launderer?

by: (Senior Research and Development Manager) on

Googled it? We offer insight to firms who vet their customers for ‘negative news’ or ‘adverse information’ through various methods of screening.

2017 has certainly begun in a controversial way, especially when discussing the new American President and the media.

Political allegiances aside, the media storm reminded me of how difficult it can be for anti money laundering specialists to review media on potential or existing clients.

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Increasingly firms are implementing controls to screen their customer for ‘negative news’ or ‘adverse information’. This could involve simply using internet search engines, manual screening of third party databases or automatic client screening. These processes assist firms in getting an understanding of the risk posed by the customer, particularly financial crime risk.

I thought it would be worth taking a look at some factors to consider when carrying out negative news searches on a client.

Help! My client’s name has matched with a known money launderer!

First and foremost, you need to understand whether or not this is actually your client: is it a positive match?

Whilst not intending to be an in-depth analysis of ways to screen for negative media, it’s worthwhile spending a small amount of time to look at how the method impacts the output.

Using a search string in a search engine is a useful and free tool to identify adverse media. Typing ‘Customer name’ AND (crime OR corruption OR money laundering OR bribe) can give you an indication of any adverse media. This is known as a Boolean search, and whilst it can be extremely useful, it can generate a large number of results which may not necessarily match the client.

Issues start to arise if you attempt to find a client with a popular name. Using this search string with the name David Jones resulted in 664,000 matches! 

Automatic screening systems can be implemented to screen other data points alongside a customer name, such as location and date of birth, which can rule out a number of false positives before matches are returned for review.

Before entering panic mode, review the article and consider if it matches your client’s age and location.  

Is it a fact?

Once you have established that it is your client, you then need to consider what the media is telling you.

Reports from regulatory or law enforcement of a client being convicted of a predicate offence to money laundering should be taken and investigated seriously. If suspicion or knowledge exists that the customer is engaging in money laundering, a suspicious activity report would be required.

It’s only an allegation…

Our job is not to play judge and jury; it is to assess and manage risk.

Review the negative news alongside other information you hold on the customer, including transaction data. The negative news should be seen as a ‘trigger’ event to carry out a review of the customer.

Looking at the customer in light of the additional information, is there anything that would now be considered suspicious? Is the risk rating still valid?

Back in 2011 the UK’s former regulator, the Financial Services Authority published a report on Banks’ management of high money-laundering risk situations, which makes clear that serious allegations should be taken seriously.

“At around a third of banks in our sample, serious allegations against customers were often discounted where criminal charges were unlikely to be brought, for example because the customer maintained good relations with allegedly corrupt regimes.

As a result, senior management were willing to take on extremely high-risk customers, including where evidence appeared to point towards the customer being engaged in financial crime, as long as they judged the immediate reputational risk to be low.”

But allegations can run amok on the internet, so this leads nicely to the next question…

Is the source credible?

This is often the million dollar question. An exposé in one news outlet with no corroborations wouldn’t necessarily require a rush to exit the client relationship, neither would allegations in personal blogs. On the other hand, if a number of well-regarded news outlets report on allegations, these should be considered carefully.

How old is the news?

The age of the news and the events that took place is an important factor when assessing risk. Allegations over 10 years old will not be as relevant as recent allegations.

Is it actually adverse media?

This may seem like a strikingly obvious point, but still in need of consideration is an understanding of the information. A prospective client may have returned matches for being an “arms dealer”, but is it what it seems? They could be manufacturers of robotic arms or distributors of prosthetic limbs!

Next steps

The existence of adverse information on a client may not be a reason to exit the relationship or refuse to onboard. The risks that it raised to the firm must be considered carefully by the relevant people in your firm and managed appropriately.here is the old saying in compliance, ‘if you can’t evidence it, it didn’t happen’.

Good record keeping is imperative when making decisions that inform the risk assessment of a client. Ensure that you document your assessment and the rationale for any decisions made. 

By following us on LinkedInFacebook and Twitter you’ll stay up to date with the latest developments in governance, risk, anti-money laundering and financial crime prevention, and the professional qualifications we offer.

1 Comments :

Yes exact match is important besides any additional information regarding all identical transactions earlier carried out while the name was not updated in allerts. Whole previous account activity should be taken as suspicious and considered for reporting. A good STR must demonstrate chances of incriminating evidence. Appreciate practicality.






















February 21, 2017 01:05

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