I know that it can be frustrating for consumers to be constantly bombarded with questions and requests for proof of address documents and ID by everyone from utility companies, banks, insurers and, yes, your financial adviser. And while I know that it can seem superfluous, I’ve written this post to try and explain to our clients just why we here at Infinity ask all of the questions we do in the hope that you will understand that it is an essential, if slightly annoying, part of the financial planning process.
The demands we make regarding the identity of our customers stem from regulatory practices known as Know Your Customer, or KYC for short, which are part of anti-money laundering (AML) measures. AML is a response to the fact that the global financial system is extremely vulnerable to abuse by criminals to launder money and finance terrorism. It requires those working within the system to carry out checks, keep records and put systems in place to protect against this happening.
An international standard to fight money laundering has been set up by the Financial Action Task Force which has drawn up a series of recommendations which ‘form the basis for a co-ordinated response to these threats to the integrity of the financial system and help ensure a level playing field.’ These are regularly revised and updated. The recommendations include strict customer due diligence (CDD) procedures which state that firms in the financial sector must verify the identity of new and existing customers.
In order to check that you are who you say you are, we need to see evidence of your full name, date of birth and residential adddress. That evidence can be in documentary or electronic form and preferably from a government-issued document, such as a passport, ID car or driver’s licence which includes your full name and photo and date of birth. We need to cross check this with your address on a recent utility bill or bank statement. We may also need details of your employment, copies of recent and current financial statements and the source and origin of funds. And if your circumstances change, we will need you to provide proof of any changes so that your record is up-to-date.
We are obliged to keep this information on record but rest assured that we appreciate how precious your data is and we will never share any information unless it is absolutely necessary to comply with the due diligence process.
Certain situations or transactions, although they may be perfectly legitimate, may raise red flags and therefore be subjected to enhanced due diligence procedures such as extra identity checks or making sure payments are made from an account in your name. Examples of red flags include customers who are in positions of influence and present a higher risk for bribery and corruption, a client who makes a claim shortly after purchasing a general insurance policy, a customer who pays for a policy via a third party such as a currency broker, insurance premiums being paid from more than one source for the same policy, payments coming from high risk jurisdiction and so on. Of course, these are not indications of guilt on the part of a client but they do warrant further investigation so that we can satisfy ourselves that the transactions are legitimate.
It is important that all Infinity financial consultants follow KYC guidelines so that we can play our part in fighting money laundering. We are at risk of sanctions if we fail to comply and could even be deemed complicit if we fail to carry out sufficient due diligence.
So while we appreciate that our clients would like as few hoops to jump through as possible during the financial planning process and we strive to keep these to a minimum, we have to comply with certain day-to-day responsibilities which, at the end of the day, contribute to making the world a better place for all of us. Thanks for your patience!
I have over 20 years of experience in the financial services industry and hold a Chartered FCSI qualification. I ensure that our operations are fully compliant with the rules of our most stringent regulators.