Last week I was doing some training on the topic of enhanced due diligence, and – seeing the extensive list of what is entailed – one of the delegates asked wearily, “Is it worth it?” And he had a very good point: for some clients, the beefed-up EDD requirements will make the relationship un-commercial. In other words, the DD effort will cost more than the relationship will generate in profit. “You have to strike a balance between compliance and commerciality,” I advised – and I can tell you that I was secretly jolly proud of that phrase. I will store it away and use it again – please feel free to do the same. There may even be a very worthy but rather dull book title in it.
The question of balance is one I have touched on before, in an ancient blog post on the gold-plating of legislation. Each jurisdiction has to find an equilibrium between leading the field with ground-breaking legislation (which might be the right thing to do in moral terms, but disastrous when in competition with other regimes that are more, well, let’s say accommodating) and not falling behind the accepted international standard. And the same decisions must be made at company level too. Legislation is always written at a very high, general level, e.g. “You must verify the identity of your clients.” Guidance then comes along and suggests how this might be done, but – particularly with the risk-based approach – the specifics are left to the individual regulated entity. So should a company stride out ahead and ask for information and documents that their competitors do not seek, in order to protect their own business, but at the same time risk losing out to less demanding rivals – or should they nestle in the herd and take comfort from being able to tell applicants “Well, everyone’s going to ask you for the same information, so you may as well give it to us”?
I hate money laundering 