Dansk Bank failed to identify the beneficial owners of undesirable financial vehicles…
The Estonian branch of Dansk Bank failed to identify the beneficial owners of undesirable financial vehicles even if they were UK companies when they requested to open accounts. There is no real excuse as the basics of new client identification have been around for some time. It will be no surprise if the actions of the Danish regulator who have failed to make sanction are also examined in sharp focus.
Given the general perception of the way that Russian society appears to us in the West to operate it would come as no surprise to learn that the management of the branch might have been “leaned” on. One wonders at what level of seniority within the bank that these failings took place? Something the regulator would be expected to unearth.
I was an anti-money laundering officer for many years for different stockbroking firms and there were different types of clients opening accounts, it was important to identify which type of client one was dealing with. In the United Kingdom and individual that wishes to open an account in his or her own name provides some form of authenticated photo identification and proof of address is normally sufficient information. Things got more complicated with non-EU nationals opening an account and in these cases evidence needed to be provided in English which was not always easy, however there are plenty of different checklists to ascertain politically exposed persons. Of course a PEP would normally be completely untarnished but the attitude we tended to take was that if someone appeared on a register we would scrutinise them very carefully.
The most complex was where a financial vehicle was being used to open the account. In some cases these vehicles were established to provide the underlying or beneficial owner with confidentiality. Clearly this confidentiality is not something that firms and banks can allow. The solution was not that complicated in that any individual person in his or her own name who held more than 10% shareholding or partnership of the vehicle being presented to open the account had to be identified in the same way as the individuals described above. If a Trust was presented we wanted is know the identity of the settlor and the beneficiaries and we wanted to see the trust letter that set up the trust in the first place. This often resulted in an information being freely given but in some cases further obfuscating vehicles were presented as shareholders, in these instances we simply continued to mine down to the beneficial owner in his or her own name with photo identification and evidential proof of residence.
Therefore an account was never opened without this information being ascertained. In some cases a further judgement call had to be made as to whether the collated knowledge of the individual was sufficiently favourable to open an account. A simple Internet search would normally reveal the activities of these individuals. So a decision could be taken if a sufficient picture of the beneficial owner was available.
One hears a lot about “source of funds” but the identification of the client must be paramount. Third party payments and receipts need scrutiny particularly if the firm or bank is uncomfortable with the client. In those instances the account should be promptly closed and a report made to the relevant AML authorities.