Jo Geraghty


Know your customer

Date added: 27th Nov 2015
Category: Culture of conduct/ethics

How well do you know your customer? In Barclay’s case their lack of process has cost them a £72 million fine.

How well do you know your customer? No, we’re not talking here about the importance of developing genuine customer insights as one of the three key traits of an innovative next-generation organisation. Our enquiry this time relates to the ‘know your customer’ regime imposed as part of anti-money laundering requirements.

We’ve written previously about the ways in which this requirement impacts on the customer relationship and on the different approaches adopted by organisations ranging from belt and braces full paper trail approaches to online identification and verification. Whatever the approach, regulators (and common sense) says that it should be appropriate and proportionate to the perceived level of risk. The consequence of this is that transactions involving some individuals, such as those identified as politically exposed persons (PEP), should be subject to a higher level of due diligence and scrutiny than others.

Organisations which operate an engaged culture which incorporates risk awareness should be able to rely on their employees to interpret know your customer regulations in an appropriate manner, bearing in mind the potential risk to the organisation and the impact on customers. Unfortunately, it seems that in one particular instance, Barclays’ employees put the chance of a substantial fee ahead of financial probity. In carrying out a transaction for PEP individuals in 2011/12, an FSA investigation has revealed that not only did employees fail to carry out the enhanced levels of due diligence and monitoring required, Barclays actually “applied a lower level of due diligence than its policies required for other business relationships of a lower risk profile.”

Commenting on their findings Mark Steward, director of enforcement and market oversight at the FCA said: “Barclays ignored its own process designed to safeguard against the risk of financial crime and overlooked obvious red flags to win new business and generate significant revenue. This is wholly unacceptable.”

How well do you know your customer? In Barclay’s case their lack of process has cost them a £72 million fine.

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