CUSTOMERID

Customer identification in the increasingly common circumstances in which banks find themselves being asked to open account relationships without being able to meet customers face to face in order to verify identity.

The Cross Border Group Customer Due Diligence paper recognises the non-face to face scenario as involving added risks and says that banks need to take additional verification steps in order to counter this additional risk - in other words to go further to check that they are dealing with a real natural person and that the person seeking the relationship is indeed the person he or she claims to be.

This creates particular difficulties for banks in an offshore environment where the non-face to face situation is likely to be more prevalent, with customers coming from a wide range of countries. (The issue is not one simply for banks. The offshore fund industry could also face major issues, depending on the precise outcome of the present discussions).

This is also an area where the developing technologies surrounding digital signatures and identification seem likely to have a crucial role to play in terms of helping towards effective solutions.

CUSTOMERDUEDILIGENCE

Due diligence, particularly where referring to an ongoing account relationship between a bank and its customers, has two separate aspects - first, customer identification at account opening, and secondly - once the relationship is in place - ensuring sufficient ongoing knowledge of the customer and his business to be able to conduct meaningful monitoring for signs that an account is no longer conforming to the expected pattern of business and may be used for illicit purposes.

In reality, this second aspect is by far the more difficult for a financial institution to deliver. The days are gone when most banks were staffed to deliver a very personal level of service for every customer.

Of course, that still applies to the large private client. But elsewhere, the sheer volume of transactions in the mass market means that such routine personal involvement and oversight of individual accounts is simply not feasible. Again, there is a need to look to the developing technologies to provide more effective solutions - computer software that can better alert banks to unusual or anomalous transactions, not only in absolute terms but in the context of each customer's expected range and scale of account activity.

Some may see such programmes as eventually replacing human beings, but, more realistically, they can at least take the drudgery out of identifying the unusual, allowing experienced staff to review particular accounts, to determine whether there are genuine grounds for suspicion.

(Source: Cheryl-Ann Lister, Chairman and CEO of the Bermuda Monetary Authority)