Plea for proof

Over two decades of AML training, I have heard many questions over and over again.  I don’t mind this at all, and I like to think that I have refined my answers so that they are more succinct and helpful.  But occasionally someone will ask something that I have not considered before.  I was reminding a group about the importance of keeping a record of their important AML decisions.  After all, in the risk-based AML environment in which we nearly all operate, you might need to demonstrate how you came to the AML conclusion that you did.  For instance, if you decide to accept a non-standard piece of identity documentation, or to downgrade the risk rating of a client from high to medium, or to hold off making a SAR about a client until they answer just one more request for information, you need to be able to show that your decision was appropriate and proportionate given the money laundering risk with which you were faced.  If you like, it’s the administrative price you pay for being granted the latitude of a risk-based approach rather than having to operate under a more prescriptive regime.

All fine and dandy, said someone last week, but what if you leave the company where you were making all these important AML decisions, and you don’t take the records with you (of course).  And then something changes – the company goes bust, or is taken over – and the records are gone.  How then do you demonstrate, perhaps years later, that you did the right thing?  What if it turns out that one of your clients was a money launderer, and your handling of their account is being questioned?  How can you show that you did indeed apply the risk-based approach with diligence and professionalism?

I answered as best I could.  In short, I said, the system is not perfect.  But investigators and regulators will recognise and understand that former employees are not permitted to take records with them on departure.  They will use all the legal weapons at their disposal to winkle those records out of the former employers’ file as part of their investigation, but this may not be possible.  And the aim of investigators and regulators is not to set traps for the regulated: if you are doing a good job for your current employer, the assumption will be that you did a good one for your former employer.  By this point, I realised that I might be flannelling a bit.  What do you think?  Does anyone have any more practical words of comfort?  Has anyone – heaven forbid – found themselves in this situation?

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4 Responses to Plea for proof

  1. CDWOS says:

    Having reread your answer to a very interesting question, if the company has gone along with its records how is your ‘old’ company going to be involved in the enquiry or investigation if there are no surviving records. The lack of legal entity and surviving records should leave a (black) hole at that point in the authorities timelines and investigations as there will implied information from the records of any third parties who engaged with the defunct company but there would be no direct evidential records………….As I am not a lawyer I do not know how much of a case could be made from the third party records as there would be only one side to all the information with no corroboration from the instigator or recipient (the defunct company). Presumably under those circumstances a case against an individual (as opposed to a legal body) could be very difficult to build and impossible to defend if all the defendant’s records no longer existed. In UK law would such a set of circumstances not preclude the bringing of the case to trial as any form of defence by the individual in the spotlight would be impossible?? I don’t know but it feels equitable for there to be no grounds for a case under these circumstances.

  2. I think the questioner was wondering about regulatory interest rather than a criminal trial. It would be easy to show that the questioner worked at the defunct company at the time in question, and the regulator might be considering whether the questioner had acted with prudence and probity as an employee in the regulated sector. This would be doubly so if the questioner had held a “controlled function” position or equivalent.

    Your point about a one-sided argument remains valid, of course, but in the regulated sector, reputation is very important. If you are tainted by association, it might be more difficult to get work in the regulated sector again, particularly in a compliance function.

  3. bertiecat says:

    Already the first person to go under the bus is usually compliance and the MLRO when the regulator finds fault (justified or not). In a world of significantly increasing senior management accountability, this doesn’t bode well. Are we all doomed?!

    • Welcome to the blog, Bertiecat, and thank you for your comment. I must admit that this is not what I have found – here in the UK we have had very few prosecutions of MLROs. Or do you mean under the corporate bus, rather than the regulator’s omnibus?

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