DUE DILIGENCE USING DATABASES OF HIGH-RISK INDIVIDUALS AND ENTITIES IS NO LONGER EFFECTIVE; WHAT'S NEXT ?

For twenty-five years plus I have been involved in anti-money laundering consulting, including seven years lecturing and writing for two companies selling commercial off-the-shelf databases of high risk individuals and entities, and a tour of duty with a major insurance firm, conducting enhanced due diligence of foreign applicants purchasing extremely large life policies.

While in the past, customer identification procedures and enhanced due diligence investigation at account opening, using databases and online resources, were generally effective to confirm client identities, that is unfortunately no longer the case. Standard commercial off-the-shelf databases, no mater how complete and how often they are updated, simply cannot cope with the current ability of financial criminals and terrorist financiers to obtain clean, bulletproof forms of identity, under aliases, that can stand up to the best Enhanced Due Diligence investigation, because even a deep dive will not expose a state-of-the-art passport, which has sufficient information support in place, to verify any and all inquiries as to identity. Customer identification can no longer be assured, at any level.

You can blame corrupt government officials, or the explosion of Citizenship by Investment (CBI) passport programs, which frequently afford financial criminals the perfect counterfeit identity, but we must focus on a solution. Thew only reliable Customer identification solution, the use of facial recognition technology to make a positive identification of a target, but there must be an extensive image library, of quality photographs, available to check the target's images against, and that does not yet exist for commercial, non-law enforcement, use. Whether it will ever be available, in a form adequate for CIP purposes, is not known; the sheer amount, and scope, of images required to be effective is huge.

So, if you cannot stop a financial criminal from opening an account, you must rely upon your ability to identify and interdict him, in real-time, using a financial crime detection platform. It is time to abandon traditional Customer identification techniques, as they are not effective today, and move on to identifying the money launderer by his transactions. If you do not have adequate programs for that purpose, you are advised to focus on acquiring them forthwith, lest you not only admit money launderers and sundry other types of financial criminals into your bank, but you fail to identify them in action.