Client Due Diligence: Dealing with clients and law firms remotely

Monday 6th April 2020

CDD Passport 576913 640

Guest post by Matthew Moore of InfoLegal 

Many firms have asked what they should do about undertaking client due diligence (CDD) while their offices are closed or the client is self-isolating in accordance with Government guidelines. The firm’s policy is likely to require sight of the original documents or a certified copy from someone else in the regulated sector, but what if this is impossible to obtain at the outset of the matter as a result of current circumstances? Do the instructions have to be declined?

The good news is that alternative ways of satisfying the requirements should be possible in most cases. Of course, all depends (as ever) on the risks of each situation and whether they can be addressed in an adequate manner through other means.

The main point to take on board is that seeing an individual client face to face who is not known to you, or to someone else in the regulated sector who is willing to certify their identity, is clearly preferable for very obvious reasons. It is not, however, a mandatory requirement as such.

Para 4.9.1 of the Legal Sector Affinity Group AML Guidance states that although “in most cases” face to face verification should enable most clients to meet the requirements it follows that for some it will not do so, nor is it essential to do so in most other cases. The same section also states that in some instances e-verification in its own right may be sufficient, though it does also acknowledge at para 4.3.3 that this is capable only of proving that someone of this identity exists, and not necessarily that you are dealing with that person.

Modifying processes for lockdown

  1. Taking all of this into account you might therefore fairly modify your normal procedures in current circumstances where a client claims to be unable to attend at your or anyone else’s offices. We suggest a three, or perhaps four, stage process.
  2. You ask the client to send you a copy of their normal documents – ideally a photocopy but possibly a photo via their or a relative’s phone. If this is legible you should print this off for your file. An alternative might be to ask them to hold up the documents during a video call with their face also in vision which you would again note however possible.
  3. You commission an e-verification check of that document and the details contained on it such as the passport number so that it may be checked electronically.
    If that check produces no concerns you send a letter to the client at their given address and require some form of acknowledgement to be sent to you by post. This would be on grounds that a fraudster would find it difficult to intercept such items via the postal system.
  4. As an optional fourth step, you could then request that the client follows this up by providing a sight of their documents in the normal way at a later stage of the transaction if you do meet with them, as long as other risk factors do not suggest otherwise. You could, however, fairly decide that you have met your responsibilities already.

A good example of where risk considerations would be likely to make this alternative process inadvisable would be matters involving a sale of a vacant high value property as in the Dreamvar (UK) Ltd v Mishcon de Reya and other such related cases.

If deviating from your normal practice in this way while the current restrictions on movement apply, you might also request sign-off on a case by case basis by your MLRO, MLCO or perhaps Head of Department.

Central Law Training’s Money Laundering Compliance in Private Practice course will be running as a virtual classroom on Monday 27 April. Don’t miss this opportunity to get up to speed on SRA enforcement and how to overcome CDD challenges at this time.

 

 

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