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Chris Hamblin

Compliance Matters

9 September 2013

 In the first of a regular series we explore the compliance side of the relationship manager’s job. RMs in certain countries are being held to greater account than before for their compliance duties. Here CM dissects a list of them as laid out in the wealth management chapter of the Joint Money Laundering Steering Group’s Guidelines. 

The JMLSG starts by enumerating the money-laundering risks in the sector. All relationship managers ought to be aware of them, even though their compliance departments typically have the job of codifying them in company policy. They are as follows: 

An appreciation of these risks will be of massive help to a private bank’s compliance officer – or even an RM – in the formation of legitimate suspicions that might lead to a suspicious transaction report being sent off to the Serious Organised Crime Agency. 

The RM faces a quandary: what is a suspicious transaction? In most European Union countries for most of the time they have been obeying EU anti-money-laundering statutes, it was synonymous with an unusual transaction. The JMLSG still makes the odd pronouncement in which it conflates the two, although it should not because banks have long been required to take a risk-based approach to money-laundering problems. The MLRO always has the last say about the sending of a report, but the JMLSG expects RMs to be often the first source of suspicion because they operate on the front line of money-laundering control. 

This is evident in point 5.4, which says that “the role of the relationship manager is particularly important to the firm in managing and controlling the money-laundering or terrorist-financing risk it faces.” In 5.5 it states that he or she must “at all times” be aware of the dangers of “becoming too close to the client.” He or she should guard against a “false sense of security,” presumably the firm’s security from the threat of regulatory fines or worse. He/she should also guard against “undue influence by others” (this is not explained) and “conflicts of interest” (also unspecified but presumably this refers to the bank’s impetus to make a profit by treating the HNW as a customer when it should be thinking instead of treating him as a suspect). 

The RM should also be worried about his/her personal safety (para 5.6). This is not an idle warning; criminal networks have been known to gain favours from high-street banking staff by threatening them with beatings. Some years ago a French private bank reported its findings about a gypsy network to the police. The head MLRO told a conference that “the gypsies” in France could use their contacts in the police to find out the whereabouts of anyone who had moved to escape intimidation and as a result, the MLRO was sent to New Caledonia in the Pacific to keep him from harm. Para 5.6, some might think rather naively, states that firms should have suitable internal procedures to require staff including RMs to report the fact that they have been menaced and a policy for reporting such incidents to the police. RMs, it adds without giving a reason, should never handle cash. 


Although it is the RM’s job to sell services to the client, he/she is also compelled to gather information on him/her. This, according to point 5.9, means asking him at every turn for his reasons for using financial institutions, businesses or addresses in different jurisdictions. If the HNW uses these facilities across the private bank’s group, it should consider the appointment of someone to act as a leading RM. Wealth Matters would like to hear from any readers who know this to be the way their businesses do things. If such a structure exists, the leading RM’s job is to compile enough information to know and understand the HNW’s business structure. 

Private banks, as the JMLSG often points out, should gather information at a far more granular level that normal retail banks would for their customers as the risk is greater. RMs, according to point 5.13, should obtain information on the following: 

the origins of the client’s wealth; 

documents relating to the economic activity that gave rise to the wealth “where possible and appropriate”; 

This last is likely to be tricky as, as one MLRO once put it, “there are no usual transactions with high-net-worth customers.” 


Point 5.15 calls on relationship managers to do more detective work: “in wealth management, relationship managers should generally visit their clients at their place of business in order to substantiate type and volume.” They should keep a record of: 

There is one job that the RM does not have to do: all new wealth management customers should be subject to “independent review and appropriate management approval and sign-off” (point 5.16). 


The regulations leave it up to the private bank to decide who does the necessary reputational searches to determine the level of risk to be assigned to new customers. The RM, however, has the job of obtaining information about anyone the MLRO asks to provide a written reference about the customer. References should only be trusted if they are addressed only to the firm and come from the referee directly (5.17). 


This higher level of information-gathering occurs when the HNW in question is a “politically exposed person” (in which case, senior management sign-off is always needed) or poses a high money-laundering risk in some other way. The JMLSG leaves the details up to the firm. Transaction-monitoring also has to take place, as the only true way of “knowing one’s customer” is through his transactions. This, however, is not earmarked as a job for the relationship manager and is generally done centrally with the aid of software. 

Although the JMLSG notes expect RMs to gather plenty of information and sit on the “front line” of their firms’ anti-money-laundering efforts, their compliance tasks are essentially menial ones. If something is amiss they might be expected to be the first to form suspicions, but the suspicious transaction reporting process is generally supervised centrally by the compliance department. The JMLSG certainly does not expect the RM to “mastermind” the compliance effort.