Risk and Reward: Too Good to be True

To effectively manage client risk you need to be asking as many questions as possible. Don’t always take what you hear as gospel and query how plausible their answers actually are. If you want to be sure you and your business are safe from abuse you may not wish to rely on an intermediaries or third party’s due diligence reports. I would always want to make my own checks too for my own peace of mind.

What is the business worth to you? If the risks out weigh the benefits of working with a client why proceed? One of the emerging issues locally in Jersey is that of the registered office where for a small fee a firm can take on a disproportionate amount of risk. If you are taking on a client with substantially higher risk, they should at least offer a higher reward; a reward which will make the enhanced due diligence efforts more worthwhile and beneficial in the long run.

The global market place means that a firm’s reach goes far beyond their own borders. If a firm manages clients from foreign language jurisdictions, with name transliteration issues, different naming practices and conventions it is imperative that the compliance teams make searches in the original language of the entity or else fail to identify important leads and information. All too often we find results on entities that only have web search results in their original language which if missed could cause firms legal, financial and reputational risk. This global reach goes in both directions and the rise and rise of US Foreign Corrupt Practices Act prosecutions serves as a warning to all those who wish to cut corners in their due diligence procedures.

Inconsistencies in responses and other triggers mustn’t be ignored. As a compliance officer if you do have a ‘gut feeling’ don’t ignore it - trust your instincts. To manage these risks ensure that you are up to date, well trained and understand all the issues at hand especially when dealing with high risk rated clients.

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