Reducing the risk of money laundering

• Know Your Customer (KYC) which relates to obtaining and using information about a customer for anti-money laundering purposes; and

• Anti-money laundering monitoring, which looks at how a customer is using a firms products and services and how this may point to possible money laundering.

The paper, Reducing money laundering risk Know Your Customer and anti-money laundering monitoring, has been prompted by the FSAs desire to ensure that the regime is as efficient as it can be for regulated firms and consumers and as effective as it can be for the police and other law enforcement agencies. Developments in technology, the law and policing priorities, as well as the Home Office review of the Suspicious Activity Reporting system, have contributed to this discussion paper. The financial services industry is supportive of this papers publication.

The debate will help the FSA decide whether there is any need to make changes to the FSA Handbook of rules, or influence the industry developed guidance on these anti-money laundering controls. This paper should also assist firms in understanding clearly the FSAs regulatory standards so that these can be taken into account in firms anti-money laundering risk management practices.

The FSA encourages all interested stakeholders to respond to the options and questions set out in the paper. We will be holding a roundtable discussion in the autumn on the issues raised in order to further stimulate the debate.

Notes for editors

1. The Discussion Paper Reducing money laundering risk Know Your Customer and anti-money laundering monitoring can be accessed at http://www.fsa.gov.uk/pubs/discussion/ . The closing date for submissions is 30 January 2004.

2. Further information about the FSAs anti-money laundering work can be found on the FSA website at http://www.fsa.gov.uk/what/ml_terrorist.html

3. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

4. The KPMG review of the Suspicious Activity Reporting system can be found at http://www.homeoffice.gov.uk/docs2/kpmgreport.pdf http://www.homeoffice.gov.uk/docs2/kpmgreport.pdf

5. The FSA outlined its approach to carrying out its anti-money laundering responsibilities in a speech by Carol Sergeant in July 2002 www.fsa.gov.uk/Pages/Library/Communication/Speeches/2002/sp101.shtml