Abstract
This article highlights the benefits of combining personal and company data as
an effective weapon against money laundering
Introduction
The latest anti-money laundering regulations mean organisations have more
than just fraudsters to worry about.
The long arm of the FSA means firms are likely to face hefty fines and
prosecution if they don't take the right steps to protect themselves and their
customers from money laundering.
It's just four months since the 3rd Money Laundering Directive came into force,
putting further pressure on businesses to carry out the appropriate level of
checks.
But the question is what sort of data will give businesses the best possible
protection from money laundering, as well as ensuring compliance.
Beware the all-seeing FSA
The new Money Laundering Direction requires FSA regulated organisations to
carry out checks to verify the identity of all clients, irrespective of the time
that they have been dealing with them.
Companies that fail to comply face substantial fines, loss of reputation and,
potentially, a prison sentence.
The eye of the FSA is watching and firms need to make sure that anti-money
laundering processes are top priority.
Last month the FSA published the findings of its first industry wide review of
how well firms are managing risks, following the new legislation.
The results show that larger firms are making headway in tackling money
laundering, by engaging senior management and taking a more risk-based approach.
Similarly, medium sized businesses have been found to be taking steps in meeting
the challenges.
However, smaller firms have been struggling to meet their obligations with the
FSA stating that "there is still room for improvement".
It identified staff training and ongoing risk assessments as key areas in
need of work.
But, of course, the challenge facing businesses is finding cost effective
solutions to help them check and monitor their clients quickly and easily
without this impacting on the customer relationship or customer
acquisition in any significant way.
Indeed, the media regularly run stories from aggrieved consumers and businesses
who fail to understand why their identity has to be verified when they want to
make substantial deposits or open new accounts, highlighting the considerable
impact money laundering regulations can have on the customer experience.
The key, therefore, is to find a way to verify customer identity without the
customer feeling that they are being put under the spotlight unfairly, or
impacting the service experience to such an extent that the customer goes
elsewhere.
Being able to verify customer identity online is, therefore, crucial.
But being able to verify every aspect of a customer's identity - especially in
the case of business customers - is vital to ensure compliance with the
regulations.
Know all your customers
In the race to keep up with regulations, companies could be forgiven for
focusing on existing customers, while letting new ones slip through the net.
But the FSA makes it crystal clear that all customers must be checked in the bid
to clamp down on money laundering.
This means firms must have a clear picture of all aspects of a business
customer from its financial status, to the people running the show.
And the key to avoiding the threat of fraud is information.
Organisations need to invest in systems that give them as much information on
their customers as possible, and in the most readily accessible way.
Plus they mustn't forget that the initial check is just the tip of the
iceberg.
Ongoing monitoring is vital to help firms keep an eye on customers and alert
them to changes in the organisation which may impact on their compliance with
money laundering regulations.
In particular it's essential to know who's running a business.
This means identifying business partners and directors, as well as confirming
the trading address of customers and suppliers.
It's easy to assume that the information provided is correct, but anti-money
laundering regulations put pressure on firms to double check and follow up
references.
If an organisation cannot prove that they have done everything necessary to
validate a business with which they deal, including its directors and
shareholders, they could face severe financial penalties and legal
implications, as well as incur losses through fraud.
So the key is to be able to verify the people behind the business as well as the
organisation as a whole.
And by using the combination of information about an organisation and personal
information about directors and shareholders now available from a variety of
reliable sources, businesses have a much greater ability to be compliant.
It's all in the blend
Blended data is data which combines personal information on directors and
shareholders with information on the business as a whole - is available in a
range of new solutions, providing commerce with some simple ways to avoid the
penalties of non-compliance.
And with online access to this level of data, organisations of all sizes can
benefit from the highest level of protection against the financial, legal and
regulatory threats presented by money launderers.
More and more businesses are turning to blended data solutions such as
Equifax's, which accesses consumer and commercial databases comprising records
on over 1.5 million companies and more than 45 million consumers.
But blended data does more than just help businesses comply with regulations
when making decisions about new clients.
Crucially it also helps companies make ongoing assessments of existing clients
with smaller businesses who are most at risk in the current climate being able
to protect themselves by conducting initial credit checks on customers quickly
and simply online, supported by ongoing monitoring of any changes to their
financial status.
Also, importantly, blended data that includes knowledge on the financial status
of the individuals behind a business, means larger companies can have a greater
insight into the financial stability of new and smaller
organisations, thereby opening doors for new economic growth.
Today's tougher regulations put the onus on firms to "know" their customers and
make regular checks on the individuals within a business as well as the business
itself.
Through the use of blended data, companies can remain updated to changes to
their existing clients through alert notifications.
This information is vital for firms trying to navigate through a forest of
legislation, highlighting potential risks such as dissolved companies, overseas
ownership and presence on deceased and fraud databases.
Indeed, the level and quality of data now available is invaluable for
organisations that want early warning of
possible threats and want to a guarantee of their own compliance.
There really is no excuse for non-compliance.
The way ahead
The latest blended data solutions offer a quick and easy to use online
solution, offering instant verification to help regulated businesses of all
sizes comply with the latest money laundering regulations.
As importantly, they ensure that the financial security and reputation of an
organisation is not tarnished by unwittingly being associated with fraud.
And as the FSA continues to keep a sharp eye on the way companies manage the
risk associated with money laundering, this is no time for them to drag their
feet over compliance.
Businesses need to act now to ensure that they have systems and processes in
place to ensure on-going compliance, without impacting on day to day business.
Those that aren't prepared stand to risk the future success of their business.
Neil Munro is External Affairs Director at Equifax
Source:
Credit Control Journal
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