The FSA has decided against introducing an industry-wide requirement for regulated firms to review a...
The FSA has decided against introducing an industry-wide requirement for regulated firms to review all existing clients' identities as a way to clamp down on money laundering.
Following the findings of an independent cost benefit analysis carried out by PricewaterhouseCoopers, the FSA said it could not be satisfied that a mandatory approach for the identification of existing customers would be justified.
Money laundering regulations were introduced in 1994, however in January last year the guidelines were updated, requiring firms to complete more in depth certificates to show they had carried out checks on their clients by proving details of their identity and address. Subsequently in July last year six of the UK's largest banks announced they would reconfirm the identity of all existing clients, including those pre-1994, to verify they were not laundering money, by adopting a structured risk-based review. The FSA commissioned the cost benefit analysis (CBA), in consultation with the industry, to identify if such a risk-based approach would be appropriate for all regulated firms, or if a less prescriptive approach should be adopted. The CBA found that the costs for firms having to carry out existing client reviews would be disproportionate to the benefits.
However the FSA stressed this decision does not absolve firms from their existing anti-money laundering responsibilities and that firms must establish and maintain effective systems and controls for countering the risk that their products and services might be used to facilitate money laundering.
According to the CBA, the potential costs of conducting reviews such as those carried out by the banks are estimated at £174m, of which around 90% would be compliance costs to firms.
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An added tier of asset management can of course deliver additional benefits for certain investors, writes Graham Bentley - just be sure you can justify it to the regulator and, especially, the client