IFAs may need to gather or store additional 'Know Your Customer' information about consumers in orde...
IFAs may need to gather or store additional 'Know Your Customer' information about consumers in order to sufficiently validate the identity of their clients for anti-money laundering purposes, suggests the FSA in its latest discussion paper.
More data and checks about the client's personal and financial background could be required from existing company files as additional confirmation of a person's identity - such as KYC data - if firms already have access to it, suggests the FSA.
While many companies often require at least basic KYC information to complete the advice process and product selection, the FSA recognizes that many firms often keep additional data on file about the client's financial position, such as details of their employer or the levels of 'activity' or investment that a client may adopt, or the origin and source of funds that will be used.
The FSA points out in DP22 - Reducing money laundering risk: 'Know Your Customer' and anti-money laundering monitoring - that the many different money laundering regulations from Europe, the UK and other committees say "additional information over and above identification information should be obtained and used by firms" to verify client identity.
However, there are no specific rules for companies to adopt at this stage compared with the number of initiatives, so the FSA is considering whether to leave requirements as they are - under the Joint Money Laundering Steering Committee - and expect companies to carry the risk, whether to create specific rules set linked to the JMLSC, whether to review the matter again in two years time or make completely new high-level rules.
As it stands, the FSA has suggested ANY information on the client - no matter what it is and what it was obtained for - ought to be used to ensure individual companies are doing all they can to combat money laundering.
However, the FSA also recognizes that this would require a great deal more work as well as higher costs for time taken, data storage and maintenance if companies are expected to deliver more data.
Moreover, it could also be difficult to obtain a set level of client info as consumers tend to only reveal what they think IFAs might need to know in a particular circumstance or purchase, says the FSA.
The FSA says it believes any KYC information which has been gathered at some point on clients could be used to meet legal or regulatory requirements as the regulatory body does not believe use of the data is restricted by Data Protection Act rules.
There are some software systems open to IFAs which can counter this problem, such as using Equifax or CallCredit credit checking systems.
CallCredit's CallVerify is already used by several building societies and banks, and in 90% of cases can verify the identity of current customers without any need to contact them directly.
Costs for smaller IFA firms start at £2.20 per check conducted, however, the price falls if money-laundering checks are submitted in bulk.
Any comments on DP22 should be sent to the FSA by 30th January 2004.
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