Earlier this week, I wrote a post about source of funds and source of wealth, and the vexed issue of how far back our enquiries should go. The post attracted a couple of comments, and in one of them a reader made a very valid point, and I quote him here: “The only answer in my opinion is to fully document the conclusion drawn to include the rationale of the decision. Hopefully with full documentation, law enforcement will conclude that everything reasonable was done. What would the man on the Clapham omnibus conclude?” He then mused as to whether we still use this expression…
To find out, I turned – as so often – to the “Notes & Queries” section of the Grauniad, and here is their discussion. Fittingly enough, it seems likely that the term was first used in a court of law, to illustrate the concept of what the Americans might call “Joe Public” – the everyman. Putting aside small quibbles – e.g. living in Clapham these days is not quite as accessible price-wise as it once was – the idea of an ordinary person, with no particular (and certainly no expert) knowledge of the subject under discussion, is often invoked in courts to this day.
However, and interestingly in the context of this blog, the Clapham omnibus passenger has alighted from some parts of the AML legislation, and the concept of the everyman has been replaced with that of the regulated man. For the offence of “failure to disclose knowledge or suspicion of money laundering”, for instance, most jurisdictions have now adopted an objective test of suspicion, whereby the test is not whether the accused demonstrated the understanding of the man on the Clapham omnibus but whether he (to quote from section 6.15 of the JMLSG Guidance Notes Part I) acted as would be expected of “a reasonable person engaged in a business subject to the ML Regulations”. Likewise, paragraph 275 of the Guernsey AML Handbook makes reference to “an honest and reasonable person engaged in a financial services business”.
The idea is further refined when it comes to the duties of directors (all duties, not just AML ones – but of course that is how I came across them). Again, there is general international agreement on this standard, so I take the UK’s Companies Act 2006 as my example: section 174 (Duty to exercise reasonable care, skill and diligence) requires that: “A director of a company must exercise reasonable care, skill and diligence. This means the care, skill and diligence that would be exercised by a reasonably diligent person with (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and (b) the general knowledge, skill and experience that the director has.” So an accountant serving as a director would be expected to demonstrate the knowledge, skill and experience both of someone of director-level abilities and of an accountant. Perhaps less of the man on the Clapham omnibus, and more of the man in the Chelsea tractor?