Again, communication is critical. Those firms that utilized electronic communication from the relationship manager to the onboarding team had better processes overall. In some cases searches of various databases (sanctions lists, PEPs, adverse news) were run automatically on the verified customer name from the relationship management system. This eliminated re-keying of data, which is a surprisingly costly effort and contributes significantly to operational risk. One firm admitted, “It’s not that unusual for us to vet the wrong person.”
A question we often get is, “What do other banks do in terms of database searches. Answers vary widely for these reasons:
1. More searching/researching creates higher costs and everyone wants to reduce costs.
2. Similarly, more searching/researching will generate more false positives, which also leads to higher costs and everyone wants to reduce costs.
3. No one will readily admit the amount of KYC due diligence they are conducting to actually prevent money laundering and terrorist financing and how much KYC they are doing to meet the vague regulatory requirements of the jurisdictions in which their companies operate. In other words, they are covering their backside.
At a minimum, all clients are searching sanction lists and adverse news.
Many firms search on the verified customer name as well as on a set of name variations and potential aliases using commercial software or an in-house system. Most firms also search their own “do not do business with” list that was a component of their research. In the US, commercial banks making significant loans often search legal databases for criminal record, liens, judgments and changes of address.