Due diligence describes the process by which businesses providing financial law services check the identity and background of existing and new customers. High quality due diligence requires careful and persistent effort by financial law service providers to carry out these checks.
By carrying out such checks, there are two clear benefits for the risk-aware financial law service business. In the first instance, the business is not in any way exposing itself to any risk by criminals seeking to launder money. Secondly, it allows the business to obtain detailed knowledge of the customer’s financial position.
Strict legal and regulatory requirements have been imposed upon solicitors providing financial law services to contest money laundering and require financial law service providers to Know Your Customer (“KYC”).
KYC is the process by which financial law service providers are able to check the identity, background and other aspects of existing and new customers. This is required under the Anti Money Laundering Regulations (“AMLR”).
Solicitors providing financial law services do not want to breach any legislation or the AMLR as the consequences are severe and usually include expensive costly investigations and large fines. Although strict foundations have been laid in terms of customer due diligence and complying with AMLR within the financial law services sector, stricter measures are being imposed which require solicitors to adopt a high level risk-based approach. This will allow for solicitors in the financial law services to cement a sound basis right at the outset of forming a customer relationship.
During this difficult economic time that we are all facing, the burden on solicitors in complying with AMLR is very high and therefore high quality KYC requirements must be in place for any firm providing financial law services to enable them to complete customer due diligence as quickly and as effectively as possible
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