Anti-money laundering compliance activity is now essential, says Fiona Hayes. However, online services for verifying the identity of individuals and companies in Europe fall short of requirements.
If you work for an organisation that provides commercial services to clients you may be asked to help find a suitable electronic source for verifying those clients’ identities. The Joint Money Laundering Steering Group (JMLSG), made up of trade associations in the financial services industry, and promoting good practice in countering money laundering, recently published guidance encouraging wider use of electronic means of verification of identity.1 Working closely with the in-house legal team, I set out to discover what electronic sources were available.
The legal department wanted to provide employees with access to electronic verification of identity for UK and Continental European individuals, and Continental European companies, on top of that for UK companies, already provided.
We thought we knew what we wanted, but it was less clear what would be available on the market. Our first concern was to identify the suppliers of content with the functionality that we wanted. Issues of price would come later. The legal department had gathered some anecdotal evidence of sources similar organisations were using. In addition, I investigated the services provided by leading suppliers of business and credit-rating information. We soon discovered that what is available online would fall short of what we wanted.
Continental Europe
The biggest gap concerned online information about individuals in Continental European countries. Data protection laws on the Continent ensure that little information on individuals is available centrally and electronically.
We found a supplier which could make investigations and produce some information largely off-line, but it would be costly and time-consuming. Realistically, organisations will still have to ask individuals from Continental European countries for proof of identity.
The range of countries available online was also disappointing. We expected countries in Western Europe to be available, but even that coverage proved to be eclectic across the suppliers. What is not available online can be ordered off-line, of course, but the services fell short of what we ideally wanted. Not only that, but reports on companies in Continental Europe are very expensive compared to reports on UK companies, costing up to 10 times as much.
UK individuals
There are plenty of services on the market providing electronic verification of identity of UK individuals, and they are relatively cheap. In fact, there is a lot of choice in terms of the level of verification. This will depend on your organisation’s exposure to risk. Each organisation must decide how many verifiers are needed to enable it to take the necessary reasonable steps to verify the identity of its clients.
The organisation’s requirements on verification will determine the level of report required. The more verifiers needed and sanctions lists to check against, the more expensive the report. However, the greater the volume of reports downloaded over the course of a year, the lower the unit price per report.
Functionality can be an issue here, too. It is possible to have a service where the user clicks straight through to a verification report on a company director. In an organisation where clients have to sign up to terms and conditions that allow verification checks to be made on them, this should not be a problem.
Clients have to be informed prior to the check being made because the search will leave evidence, known as a footprint, on their record.
Although other organisations will not see evidence of previous searches, the individual can request a record and they will see what checks have been carried out.
If your organisation wants to be cautious about user access to individuals’ records, you can opt for a service that is separate from the company records. If your organisation needs to verify identity of employees who are not company directors, you will need access to this service anyway.
Price then becomes an issue. Some suppliers will charge a hefty subscription to access their UK individuals service and some will not. However, if there is a service that you want and the only barrier is the price of access to UK individuals reports, it is time to take Fiona Durrant’s advice (Gazette, 24 February, p. 2) and ask for what you want.
UK companies
This has to be the easiest category to satisfy. There are plenty of products on the market providing well-presented online reports of company information available in the public domain. The functionality is generally good and the pricing reasonable.
As with the UK individuals, there are different levels of report available depending on the amount of information required. Again, the level needed will be a matter for policy decision based on the organisation’s exposure to risk. The more detailed reports will be more expensive. And, the greater the volume, the lower the unit price.
Realistically, we were looking at being limited to electronic access to reports on UK companies, UK individuals and companies in some Continental European countries. Opening up access to UK individuals and some Continental European countries to users around the organisation, in addition to the UK company information that was already available, raised many questions about content, functionality and price.
At one point, it was suggested that we use different suppliers for each of the three categories available online. This way, we could have chosen the most appropriate service for each category, but we would have committed ourselves to relationships with three different suppliers and our users to three different sets of functionality to learn. We would also not be able to attract discounts generated by volume of downloaded reports.
We decided to focus on suppliers who could provide all three of the online services. This certainly narrowed the range of suppliers. Since those left in the frame could all provide the content, subject to the restrictions regarding companies in Continental Europe, it was down to functionality and price. Functionality provided by the leading suppliers is very impressive and customers can ask for whatever configuration they want. You may want different users to have different levels of access – all this can be arranged. The more complicated your set-up, the more likely you are to attract a charge for it, but everything is negotiable.
Price negotiation was all about discounts for volume of download predicted over the course of the following subscription year. Pay-as-you-go contracts are available, but at a higher unit price per report. The risk with a commitment contract is that you over-estimate your predicted usage and still end up paying the equivalent of a high unit price per report. If you under-estimate your usage, will you compromise your unit price when you go to top up your contract?
If there is a charging or cost-allocation scenario in your organisation, you will need a service that provides a reference box for your users to enter their details.
Branding played a part in the process. This organisation has a very high profile in its industry and choice of external supplier is a decision that is bound to be challenged in the future, particularly if things go wrong. I wanted to feel confident that, as an industry leader, we were going to link up with another market leader in its own field.
Reference
1 Prevention of Money Laundering/Combating the Financing of Terrorism: Guidance for the UK Financial Sector, Part 1. Joint Money Laundering Steering Group, 2006.
Fiona Hayes is a Research Analyst for the European Research Group, Cushman & Wakefield (fiona.hayes@eur.cushwake.com).
Updated: 29 May 2007