Response to consultation on Guidelines on risk factors and simplified and enhanced customer due diligence
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- p.24, point 47(i): I am unsure how this statement is meant to be read but it reads as though you would treat any relationship with a PEP as a beneficial owner as high risk, unless it is meant to mean that a beneficial owner who is a PEP is high risk in their own right. If the former, this is very much anti the risk based approach given that you should be able to assess the risk of a corporate client with the PEPs in the structure in accordance with the risk those PEPs represent, where they sit in the structure and the overall risk of the client in general. If the latter, then this point needs some rewording in order to make the issue clear as to what your expectations are.
- p.39, point 100(vi): you have stated “customer as a non-resident” as a risk factor for EDD but this is far too broad to be deemed an appropriate risk factor in a risk based approach. For example, does it mean non-resident from the booking location or the location from which are onboarding the customer, or even any rep office involved? Also, why would a German resident opening a current account in the UK really be high risk? It most cases it wouldn’t and so I think this risk factor needs re-assessing, otherwise the impact could be significant.
- p.40, point 101 bullet 4: similar to the above, this low risk factor regarding an institution’s base being in a country with effective AML regime – it feels to be too much of a sweeping risk factor to provide for lower risk. So many of our clients could be from one of these countries yet you have to assess a variety of other risk factors in order decide on the low risk status. I worry that a number of firm would read this the wrong way and feel that they can apply lower standards to those firms based in these countries. Also, this seems to go against the whole concept of equivalence which you are trying to remove.
a) Do you consider that these guidelines are conducive to firms adopting risk-based, proportionate and effective AML/CFT policies and procedures in line with the requirements set out in Directive (EU) 2015/849?
On the whole, yes, the consultation allows enough scope and freedom of interpretation that firms should be able to implemented an effective RBA. However, there are also some areas of the guidance which contradict the RBA and point towards a more single-factor or narrow approach. Key amongst these are:- p.24, point 47(i): I am unsure how this statement is meant to be read but it reads as though you would treat any relationship with a PEP as a beneficial owner as high risk, unless it is meant to mean that a beneficial owner who is a PEP is high risk in their own right. If the former, this is very much anti the risk based approach given that you should be able to assess the risk of a corporate client with the PEPs in the structure in accordance with the risk those PEPs represent, where they sit in the structure and the overall risk of the client in general. If the latter, then this point needs some rewording in order to make the issue clear as to what your expectations are.
- p.39, point 100(vi): you have stated “customer as a non-resident” as a risk factor for EDD but this is far too broad to be deemed an appropriate risk factor in a risk based approach. For example, does it mean non-resident from the booking location or the location from which are onboarding the customer, or even any rep office involved? Also, why would a German resident opening a current account in the UK really be high risk? It most cases it wouldn’t and so I think this risk factor needs re-assessing, otherwise the impact could be significant.
- p.40, point 101 bullet 4: similar to the above, this low risk factor regarding an institution’s base being in a country with effective AML regime – it feels to be too much of a sweeping risk factor to provide for lower risk. So many of our clients could be from one of these countries yet you have to assess a variety of other risk factors in order decide on the low risk status. I worry that a number of firm would read this the wrong way and feel that they can apply lower standards to those firms based in these countries. Also, this seems to go against the whole concept of equivalence which you are trying to remove.