Anti-Money Laundering Checklist: Your Client

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Previously I wrote about the possible connections between art trade and money laundering (here the relevant article).

Here, I would like to outline some of the most common traits that should serve as a heads up while dealing with (potential) clients.

  • Identity (for physical persons) and beneficial ownership (for legal persons); knowing with whom we are dealing with is the first step for an accurate KYC process. It is also worth mentioning that the identity of physical persons owning (or controlling) legal entities must be assessed. As part of the due diligence process, you may also use the information retrieved on the internet (these days everyone has a website). For instance, I wrote something about that here on LinkedIn.

The source of wealth; an essential part of any KYC procedure. Is the client known? If so, is he doing anything unusual (like an unusually important transaction?). What kind of job/business he and /or his family performs?

It is very unlikely, in fact, that an unemployed person or a quiet retired in his 90s will start making transactions for important amounts. I remember, for instance, that criminal organizations were precisely look for people within the categories above to launder their ill-gained profits. My colleagues in the real estate may also refer to this other article I wrote.

  • Convictions, past or current or connections with criminals or terrorist groups.

Besides the above mentioned, there are some non measurable red flags that I learnt while practicing:

  1. Is the client using intermediaries without apparent reason? There is nothing wrong in conducting business through intermediaries, however, unless the client is abroad, injured or absent for any other good reason, you should be very careful,
  2. Documentation, non consistent or even counterfeited documents definitely tell that something is wrong…

Last but not least, there are the business transactions between your clients and others:

  1. Personal or professional relationships between the parties which affect the transactions. (if your client engages in business with someone whose past is dubious, you should consider his wealth as suspicious),
  2. Your client makes several transactions with the same counterparts. (If he deals with the same companies incorporated in the other side of the world which does not even has a website, there might be something wrong),
  3. The owner, the director or CEO just doesn’t seem real; a 90 year old person recently directly a newly created business is rather usual. This is obviously an exaggeration but you got the idea.

Again, these are just examples, eventually is your experience that really matters, there are no limist to wrongdoers’ ingenuity and they will always find new ways to launder their profits. 

I suggest you always trust your feelings; if you believe something doesn’t add up it’s probably true

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Michele La Neve

White Collar Crime Attorney at Whitecotton Law Dedicated to Helping Clients Overcome Unforeseen Business Risks.