Monday, December 12, 2022


Readers who have attended any of the lectures that I presented in more than one hundred countries and territories, while acting as Financial Crime Consultant for World-Check, may recall that one of my firm rules for compliance officers is that you never, never disclose to your bank's prospective client the actual reason why your enhanced due diligence investigation found him to be to be accepted and onboarded as a new client. It is one of my cardinal rules, and for good reason. Allow me to explain, and to illustrate its importance.

The target of your investigation may take offense to your conclusion, should he learn from you the actual grounds you gave to senior management for rejecting him. If he truly is a money launderer for organized crime, he may indeed then, in anger, tip off his client, who could arrange for you to have an "accident" so that the laundryman will then probably have another bank staff member he can approach when you become unavailable due to an unforeseen event that was actually intentional. 

You also might be concerned about the classic 'honey pot" trap, where you are approached in a bar or pub, when off duty, and then engage in a romantic interlude with an eager member of the opposite sex, only to learn later that you were photographed in the act, and you end up being blackmailed into approving a new account that you otherwise would not. This is not so far fetched as you might think; it is a classic ploy, and money launderers have been known to go to great lengths for their clients, to insure success, at any cost, for them. Please understand that failure is not an option for anyone who has drug trafficker clients.

Now, on to my personal story, taken from my time as a compliance officer, handling only high-risk cases. The new potential client was himself an experienced financial services professional, owning his own business, which was located in Montevideo, Uruguay, and he was making a very large investment with us, claiming it was his own money. He had great bank references, all duly verified. My initial inquiries revealed that he had no visible outside social, charitable or business interests, and it has been my experience that wealthy and extremely successful businessmen seeking large investments also have other things going on in their lives, whether they be commercial, sporting, nonprofit or even alternative endeavors. They are never uni-dimensional in their interests outside their principal business, but this person had absolutely nothing going on in the way of after-hours interests or dabbling in other fields, even those that are purely recreational, and which you expect to see. This constitutes a major Red Flag from my experience.   

 When I engage in Enhanced Due Diligence, and a profile inconsistent with that of most affluent investors presents itself, I then look outside normal resources for answers, because something generally surfaces if you look hard enough for a target's footprint. My routine negative news searches had not turned out anything, so I elected to check out the search services located on the websites of two dozen of the world's leading newspapers, for any mention of the target, in the past, in any context. Enhanced due diligence means you pull out all your sources and methods.

I found an entry in a Sydney newspaper, from several years ago; a major Mexican cartel leader, wanted in the United States for trafficking, was captured in Australian and seeking to bond out before his extradition hearing. His financial advisor offered a multi-million dollar estate in Australia as collateral to insure his appearance at all hearings. You guessed it, that person was the Uruguayan who wanted to open an account with us.

Of course, I blocked his investment. When you do make such a call, if the client demands to know the reason, make sure it's something vague, like a failure to comply with internal guidelines or some legalese that he cannot specifically object to. In this case, the client called up and demanded to speak with the officer who had rejected him. As you know, I am not shy, and I took the call.

The disappointed client asked how he could have been turned down with his excellent bank references. I told him that, since he was linked to a known high-risk individual, our policy was not to accept his business. He then asked me the one thing that I would have asked him, had it been me as the launderer, and he as the compliance officer. He asked  "Can I get my deposit back?" To which I replied that it has already been sent back to him. What I didn't tell him was that I had passed his name on to our outside counsel, for further forwarding to a certain agency that might find his name to be of interest. 

I don't advise any compliance officer to deal directly with someone who is the object of your due diligence investigation, because you never know how your findings, if negative, will be received. 


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