Recently our Chairman, John Lord, and CRO, Marc Williams, hosted a webinar on ‘The importance of customer due diligence and the positive impacts of a robust AML process’, where they discussed the benefits of our UK-leading compliance solution and how it can improve your efficiency, increase revenue and ensure regulatory compliance.
The webinar proved extremely popular and well-attended, so much so we were unable to answer all of the audience's questions before we ran out of time. Below we have compiled some of the most asked questions that we did not have time to answer.
Why should I do customer due diligence when I know the people I'm doing business with?
If you are part of the regulated sector you are obligated to perform AML checks on all customers, regardless if they are known to you or not. Should your relationship with a business partner be an ongoing one, such as an accountant and their client, then an AML check should be performed once every 12 months.
Regulatory requirements aside, those engaging in money laundering are experts at deceiving and will appear as legitimate professionals. Many business owners have unwittingly had long-term business relationships with money launderers they assumed were run-of-the-mill business people.
Whilst you may have dealt with an individual for years, how well do you know them passed the occasional business dealings? Have you seen their books? Can you account for the source of all their revenue?
My industry isn't heavily regulated, so why should I start?
As far as AML regulations are concerned, either a sector is regulated or is not. If your sector is in the regulated sector, then you most probably will need some form of AML check software.
If your sector has no AML requirements, you may not need to carry out AML checks on potential clients, but you are still at risk of fraud. In 2022, £1.2 billion was stolen via fraud. Red Flag Alert checks international criminal databases to uncover any links to criminal activity and protect your business.
What happens if I don't have this in place?
If you are in the regulated sector and do not have some sort of AML check software in place you are likely in breach of compliance regulations. You should prioritise reviewing your AML processes and requirements, if your industry has a governing body, they can be a good source of information.
What does Red Flag Alert mean by due diligence?
In terms of AML, due diligence means the proper investigation into a client by the risk-based approach required by UK AML law. This generally includes performing AML checks, ensuring you know the source of funds and ultimate beneficial owner, reviewing the client and transaction for potential money laundering risks and any other steps that have been highlighted by your companywide risk assessment.
What is the difference between a digital and manual AML check?
Digital checks leverage technology to perform checks, whilst manual checks are done by a person. Some digital checks may also require the client's information to be manually uploaded, which can be a major drain on staff resources.
Digital checks have a major advantage over manual both in document and identity verification, as well as checking an individual’s background. A person can easily be fooled by forged documents and would not be able to check international criminal databases in any meaningful capacity.
Digital checks can utilise advanced facial and document recognition software to confirm your client's identity and that their documents are legitimate; they can also check hundreds of databases for any known links to crime, all in a matter of seconds.
If your company is in the regulated sector and is only using a manual process for your AML checks, you may be in breach of compliance. A regulated company is required to have sufficient tools in place for their AML efforts. In this instance, it would be highly advisable to seek independent expert advice on your AML requirements, your sector governing body should be a good resource.
What sources is this checked against?
Our checks are run through hundreds of domestic and international civil and judicial databases.
What does it mean to get a potential match?
A potential match is one where some of the checked individual’s information matches with information on a searched database. Rather than automatically fail the check the Red Flag Alert system records it as a potential match that needs to be reviewed by a member of staff, to then be passed or failed.
What is a fuzzy match?
Fuzzy matching is an approximate match to your search based on the similarities between the search subject and the match. An example would be if you were to search for a term on a search engine and it includes results in a ‘did you mean?’ section. These suggested results are based on their similarities with the search term but are not exact matches.
Doing an AML check with no fuzziness will search international databases for exact matches to the subject, whilst a fuzzy search will include some partial matches.
What are some of the biggest challenges companies face when performing due diligence checks?
One of the biggest challenges facing the regulated sector is that the UK laws are very strict in placing responsibility for AML measures on companies but are extremely vague about what those responsibilities require. Essentially, companies must adopt a risk-based approach and the measures in place at a company must be sufficient to prevent money laundering.
But as this varies from sector to sector and company to company, it is very difficult to know if you have sufficient measures in place. If you have any concerns, it is advisable to seek independent advice.
What are some of the biggest misconceptions about AML?
One of the biggest misconceptions about AML is that it is merely a stuffy bureaucracy or a complete overreaction to minor elements of criminality.
In truth, money laundering is one of the biggest threats facing the UK economy and pervades throughout it. Years of lax regulation and our close association with the banking systems of British Overseas Territories have made the UK very amenable to money laundering and our economy is now second only to the USA for the amount of money laundered each year; with £88 billion being laundered each year.
Money launderers are professional and highly sophisticated financial criminals who are experts at deceiving and exploiting honest businesses. Given this fact and the sheer scale of the problem in the UK, every business in the regulated sector is at real risk of being exploited by money launderers.
Can Red Flag Alert be white-labelled?
The Red Flag Alert AML system is capable of being white-labelled. If you are an existing customer, please talk to your account manager regarding this. If you are not yet a customer, click here to arrange a meeting with our staff to discuss your options.
Watch our full webinar on AML and its role in business here.
Red Flag Alert’s fully digital AML and enhanced due diligence platform has been designed specifically to allow businesses to protect themselves from money laundering and meet their compliance obligations without having to slow down their business process. With unbeatable match rates and tests that take less than a minute of staff time to send out, Red Flag Alert makes compliance fit in with your business and not the other way around. Request a free trial today to see how we can streamline your AML Processes.
