MLROs and compliance folk are creatures of precision. I (proudly) count myself among them, and I know that when I am designing procedures or assembling training materials or writing this blog, I make sure that I check my sources very carefully. For the most part, my sources are legislation (money laundering, terrorism, and AML/CFT), regulatory guidance, and pronouncements by industry bodies, law enforcement agencies and organisations like the FATF. But I do not rely on memory, even though I have been reading these materials for – literally – decades: I always return to the source to make sure that I am quoting/using/interpreting exactly the right words. Because the exact wording matters.
Take the situation in Jersey, for instance. (It really is a “for instance”: every jurisdiction has similar examples – it just happens that most recently I have been working for a Jersey client.) Their AML legislation is called the Money Laundering Order, and one of its requirements is this: “[When dealing with a PEP client] the specific and adequate [enhanced] measures… must include… measures to establish the source of the wealth of the politically exposed person and source of the funds involved in the business relationship or one-off transaction.” The phrase “[take] measures to establish” is found in many pieces of AML legislation around the world, and gives MLROs all manner of headaches. It’s not the same as “establish” – or I assume not, otherwise legislators would simply use that single word – and it’s certainly not the same as “verify” or “prove” (thank goodness).
Further vocabulary niceties are introduced in Jersey’s guidance (again, not picking on Jersey: just being lazy and using the example most readily to hand). In the chapter of the guidance that deals with CDD, local firms are told that they must understand ownership, find out the identity of the customer (and beneficial owners, etc.), obtain information on purpose and intended nature of relationship, and obtain evidence of identity. And the section looking in detail at ownership structure states that “understanding ownership involves taking three separate steps: requesting information from the customer (or a professional); validating that information; and checking that information held makes sense”. Not for one moment do I think this is accidental, or a writerly trick to avoid using the same word over and over again: these terms have been chosen precisely.
Therefore – across the legislation and guidance – the Jersey MLCO/MLRO is assessing and allowing for the minute differences between establishing, obtaining, finding out, understanding, requesting, checking and validating. Now I’m (a) an English graduate, (b) an AML obsessive, and (c) a natural pedant, but that strikes even me as quite the challenge. And once the MLCO/MLRO has it straight, s/he has to communicate it to the Powers That Be in order to get approval of the approach (and budget) needed to achieve the establishing/obtaining, etc., and then communicate the subtle differences to staff through clear and unambiguous procedures. Perhaps any of us tasked with writing legislation, guidance or procedures should keep in mind the observation of Winnie the Pooh that “it is more fun to talk with someone who doesn’t use long, difficult words but rather short, easy words like, ‘What about lunch?’”.
I’m taking the next three weeks off work and will be spending my time not thinking about AML. Well, not much. The next post on this blog will appear on Wednesday 19 August.