What is due diligence in money laundering?

Posted 4 years ago

To help prevent financial crime, everyone working in an organisation that is regulated by anti-money laundering laws and regulations has two main responsibilities. The first is to check and verify that customers are who they say they are – which is called due diligence; and the second duty is to report any criminal or suspicious activity. There are three levels of due diligence checks – simplified, standard and enhanced.

The level depends on the risk posed by the particular customer and their transactions. Customer’s details must be verified and, if they’re acting on behalf of someone else, their details must be checked too. This must be done BEFORE doing any business with or for the customer.

Simplified due diligence

Simplified due diligence is the lowest level of check. You can only use this level when there’s very little or no risk of your service or customer being involved in money laundering. You need to identify your customer and have proof that they’re eligible for simplified due diligence. And there should be no reason to think that your customer or their transaction may be a higher risk. For existing customers, you must make sure you check their details if you think their situation may have changed.

Standard due diligence

Standard due diligence is the most common level of check. You must identify your customer and verify their details. And if they’re acting on behalf of someone else, you must check and verify THEIR identity too. You must do this BEFORE doing any business with or for the customer. You also need to find out how the customer is going to use your products or services, and monitor their transactions to make sure they’re what you’d expect. You must recheck their identity if they change their name or address, or if there’s been no contact with them for over 12 months.

Enhanced due diligence

There are also situations where you have to carry out MORE intensive due diligence than usual. This is called enhanced due diligence. You MUST do this in high-risk cases. For example, if the customer is not physically present for face to face identification; or if your customer is a politically exposed person. You must do the same checks as you’d do for standard due diligence, but for enhanced due diligence you’ll need to collect EXTRA information, such as extra evidence of identity, or extra details about who the customer is acting for.

Anti-Money Laundering Training

Money laundering costs the UK around £24 billion each year.

Whether or not you work in an organisation that’s regulated by anti-money laundering regulations and laws, it’s important that you know about money laundering, because, even if it doesn’t apply to your organisation, your Clients or Suppliers may be bound by these regulations.

In this Anti-Money Laundering Course, users will cover 4 sections comprising of; money laundering, customer verification, suspicious activity, and laws, acts & policies. This course can be completed in just 30 minutes and will show commitment to The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 / The Proceeds of Crime Act 2002.

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