Handbook of Anti-Money Laundering.

CHAPTER 13KNOW YOUR CUSTOMER

13.1 WHAT IS KNOW YOUR CUSTOMER?

The basic and most essential feature of all anti-money-laundering legislation and regulations all over the world is the need for appropriate and adequate customer due diligence to be conducted, both when the relationship is entered into and subsequently during the lifetime of the relationship. Such due diligence is to enable the bank to really understand the customer and the risks they pose both to the firm and to society at large, not only in terms of the risk of money laundering or terrorist financing, but also in terms of their profitability to the firm.

The level and depth of the analysis that a firm will be required to conduct will need to be commensurate with the risks that the relationship poses. Clearly, it will not normally be sufficient for the firm just to accept information which is provided to them by customers at face value; however, as we shall see, often the local jurisdictional requirements translating FATF Recommendations into local rules may purely require recording rather than investigating or confirming information. We would always recommend that some level of investigation should generally be undertaken to establish that documents and information provided are indeed valid and that they may be used to confirm and support customer information and identification. Failure to do so could result in obviously fraudulent documents being accepted in error, with potentially serious consequences.

If a ...