Is your client like an elephant?

On Radio 4 the other day, someone was retelling the fable of the elephant and the six blind men.  (A full version is here, but in essence six blind men each feel a different part of an elephant, and end up arguing about what an elephant looks like.  Of course, the elephant is made up of all the different parts they have felt.)  And the story reminded me of the danger of seeing a client – or your relationship with the client – from one perspective only.

It is vital to look at a client (or a jurisdiction, or a proposed new product or service – it works for them all) from all angles, to make sure that you get the full picture.  This is partly why you are advised to look at four elements of risk (customer risk, product risk, jurisdiction risk and delivery channel risk).  A client that seems against one scale to be perfectly fine could appear much more risky when measured against another.  Remember that the man who felt the elephant’s trunk thought that he was dealing with a snake – what an error that would be!

This is, of course, a fine theory, but it relies on your being able to research things thoroughly.  And too often I hear MLROs complaining that information within their firms is not shared freely, or that the way their in-house systems have been set up – perhaps the scanning system, or the archiving one, or even the lack of a central system at all – means that they can’t even tell whether the information already exists.  It could well be that the client is already a client of another part of the organisation, or perhaps has had an application turned down before – but that crucial information is not available to everyone.  At best, this means that you are duplicating effort: redoing checks that have already been done, and perhaps ticking off the client as you go.  At worst, it means that you are not aware of your true exposure to this client, and so any risk decisions you make will be flawed.  So next time you are tempted to make a judgement on limited information, remember the blind men of Hindustan.

This entry was posted in AML, Due diligence, Money laundering and tagged , , , , , , . Bookmark the permalink.

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