Do unto others

The Guernsey Financial Services Commission has been rather busy recently, what with working away on revised AML/CFT legislation and guidance, and now putting out a pair of publications to explain why and how they regulate the Bailiwick’s financial services sector.  In reading one of these – the one entitled “Regulatory Framework: A guide to financial services regulation in the Bailiwick” – I was heartened to come across this paragraph, which I will quote in almost its entirety: “Financial services regulation in the liberal democracies does not seek to produce an outcome where no institutions ever fail.  This is because to do so would result in such intense regulation, both in terms of standards and supervision that the cost to the customer would be unacceptable both in direct cost terms and through reduction in choice and availability.  In consequence, market participants, including customers, must accept that there is some risk of failure.  They should exercise prudence accordingly.”

Now indulge me if you will, and let’s make a few word changes: “AML in the liberal democracies does not seek to produce an outcome where no money launderers are ever taken on as clients.  This is because to do so would result in such intense CDD and monitoring, both in terms of standards and supervision that the cost to the customer would be unacceptable both in direct cost terms and through reduction in choice and availability.  In consequence, market participants, including customers, regulated entities and regulators must accept that there is some risk of failure.”

You see what I did there?  Yes, we could eliminate money laundering from the financial system by doing super-über-ultra-enhanced due diligence on everything, but that would make the system unusable.  And so, if we admit that choices have to be made and compromises struck, then everyone – regulators included – has to accept that sometimes even the best-intentioned, most AML-committed firm will get it wrong.  I hope that regulators are as understanding of those whom they regulate as they ask us to be of them.

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

2 Responses to Do unto others

  1. Nick says:

    Interesting! So is this Guernsey implementing the 4MLD in their own style?

    • Guernsey has always steered its own particular AML path! And by far the most sensible thing to do in Guernsey’s position is to cherry-pick the best bits from MLD4 and then localise them to suit what can be done most efficiently and effectively in Guernsey.

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