This blog is the second extract from Mark's article for the FreePint Topic Series: What You Need to Know Your Customer (KYC) running from July-September 2014 which includes articles, reviews and expert tips. Register your interest now, and you'll also get a free PDF report with selected premium articles when it's published in September.
For prospective clients deemed to be 'high risk', AML rules mandate that Enhanced Due Diligence (EDD) be followed and the same more in depth due diligence is often applied to higher risk third-party agents and other entities being screened as part of the anti-corruption process.
EDD essentially means far more research is undertaken on the entity and checks are not limited just to the entity itself but will also include known associates, subsidiaries and other related entities. EDD will also involve 'Negative News' checks to establish potential reputational risks from media archives together with checks against legal databases to establish the litigation history of the prospective client or third-party.
At each stage of the due diligence process, all relevant documents retrieved, assessments given and decisions taken will be captured via a thorough audit process. This will enable the regulated entity to demonstrate to its supervisory agency what steps were taken when the decision was made to transact with the business, customer or third-party.
For higher risk relationships, enhanced due diligence may be repeated annually or in the case of a third-party agent, at contract renewal or when a significant piece of new business is proposed.
Checks against sanctions and other watchlists will often be repeated daily to ensure the business is alerted should a new client or agent suddenly be added to a global watchlist.
Within financial services, transactions will be monitored and any unusual account behaviour will automatically prompt red flags requiring further investigation and possible escalation onto law enforcement agencies via the submission of a suspicious activity report.
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You can read Mark's article in full by clicking here to download a PDF version.