Monday, September 24, 2012


The Family Office, full-time tax and investment advisors who administer the business and personal finances of wealthy families, is not immune from compliance risk. The delivery of financial services, that would otherwise be delivered by an investment bank, must always include compliance, including AML/CFT.

How could advisors within family offices expose their clients to risk ?

(1) Investments in the developing world; counter-parties, partners, companies that are the subject of the investment must be checked against multiple official sanctions lists, as well as commercial-off-the-shelf high risk databases.

(2) Vendors, suppliers, customers of a new, or ongoing, business, should always be the subject of extensive compliance checks, lest you find you are doing business with a sanctioned entity, or designated terrorist entity.

(3) Charities must always be checked, and not just against government lists; leadership, senior staff members, the beneficiaries of donations, may have a "colourful" past, or be operating front for terrorist financing.

(4) Are there any FCPA or Anti-Bribery Act issues with the investments ?

(5) Is the office contemplating a transaction with a Politically Exposed Person (PEP), an individual in bankruptcy, a convicted felon with a white-collar crime record, or other parties who status is not readily apparent.

(6) Vetting new investments under consideration, through Due Diligence, or Enhanced Due Diligence investigations, is a must.

The Family Office may not always have the reporting requirements of commercial banks, or broker-dealers, but it needs a dedicated compliance professional, to reduce risk, recognise clear and present dangers, and steer the office's professionals through the minefield of regulatory compliance.

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