One of the questions that I am asked when undertaking Anti-Money Laundering and Combating Terrorist Financing (“AML/CTF”) training is “should we just stop dealing with areas and customers that have a higher risk of money laundering and terrorist financing”? Why is it that people believe that Licensee’s and Guernsey must stop any business that may have a higher risk of money laundering terrorist financing? Has this led to a paranoia within our financial industry and could this be leading our industry to be potential uncompetitive and lacking the entrepreneurial spirit that directors, management and compliance officers should aspire to? Most importantly is our paranoia stopping us from providing investment into the developing world and allowing these people to remain in poverty?
The laws, regulations, codes, rules and guidance (“the Framework”) as published by the Guernsey Financial Services Commission (“Commission”) require that licensees have suitable and sufficient policies procedures and controls for the products and services provided to customers in order to protect the Licensee and the Bailiwick of Guernsey from being susceptible to money launderers and terrorist financiers. Licensee’s must not avoid their responsibilities or manipulate the framework, but ensure that at all times they conduct their business within the Framework. The Commission does not prohibit engagement with higher risk clients or Licensees and their customers being engaged in sensitive activities that are of a higher risk of money laundering or terrorist financing, only that licensees mitigate the risks suitably and demonstrably.
The policies, procedures and controls of a Licensee must meet the minimum requirements of the Framework, though there is nothing stopping a licensee from exceeding these requirements. The Framework is merely requiring Licensees and their employees to be able to identify and verify their customers, understand the reason and rationale of their customer in order that they can assess whether the use of the product or service is reasonable. The Framework also ensures that the minimum required information on a customer is obtained and can be provided by the licensee expediently to Regulators or Law Enforcement if required.
The Licensee must assess its customer’s not on prejudice or paranoia but on a risk based approach at the start and during the business relationship ensuring that they have sufficient knowledge and information on their client as required by their risk based approach and the Framework. Just because a customer is a higher risk of money laundering and terrorist financing does not necessarily mean that they are a criminal, just that the activities or the jurisdiction amongst other things may make the customer or their activities more susceptible to money laundering and terrorist financing and that more frequent monitoring is required to be undertaken.
There are many opportunities in the developing world that will not only allow our customers to prosper but also the people of these jurisdictions to also prosper and be able to move themselves out of poverty.Telecommunications, mining, agriculture and cash machines are some of the business propositions that I have seen being presented to licensees by their customers only to be met by the paranoia that these may expose the licensee to money laundering or terrorist financing and must be avoided or declined.
Should the question that licensees ask when they take on customers or provided products or services to a client relate to the Licensee’s knowledge and experience of the customers activity, and if the policies, procedures and controls of the licensee are suitable and sufficient for this type of activity? If the answer is no can the Licensee enhance their knowledge or policies, procedures and controls or oversight of the customers activity to become comfortable in undertaking the engagement.
By acting in paranoia it is the Licensee and their employees not the Commission or the Framework that is letting customers down and the people of these developing countries. In some ways it could be argued that we are allowing money laundering and terrorist financing to prosper by not engaging with the development of legitimate business and opportunities in these developing countries.
We can never eradicate money laundering and terrorist financing, but by ensuring that a Licensee’s policies procedures and controls meet the requirements of the Framework I believe that they can engage with customers and activities that will provide a benefit to people in developing countries and enhance the living conditions and education for all. Would it not benefit these countries and people if by applying our high standards that money laundering and terrorist financing in all guises could be reduced?