Banks and building societies should be taking a more reasonable attitude to money laundering since the Financial Services Authority has started to push for a more risk-based approach.
Rather than demanding reams of documents to prove your identity every time you open a new account, firms should now be making checks more proportionate to the investment and individual, and relaxing requirements where possible. But some companies are still taking a sledgehammer to crack a nut.
One reader – who holds several M&G funds – recently attempted to credit her godchild’s M&G account with £500 for her 18th birthday. She checked with the provider that she was able to do this, and confirmed her request in writing.
M&G cashed the reader’s cheque soon after it received it in August but failed to credit her godchild’s account. The group did not alert the reader to any problem but contacted the godchild to ask her to prove the reader’s identity.
M&G says it has a legal requirement to verify the identity of all its investors – including the receipt of third-party cheques. It claims it has processes to ensure the verification of identity is as smooth as possible and says that in many cases this is done internally so the client does not have to be contacted.
Since Doghouse became involved, M&G has admitted that in this case the reader’s godchild was contacted in error: “Due to human error this process [internal verification] was not followed, which led us to write to the registered holder,” it says.
After receiving a complaint letter from the reader, M&G updated its records to show that her identity had been verified and confirmed that no further documentation was required to process the payment. The group points out there was no delay in investing the funds – the money was in the correct investment as soon as the cheque was cleared.
However the recipient could not access the funds until the matter was resolved – more than three months later.
While it is reassuring that investment firms are rigorous with their identity checks, it seems excessive that a minor mistake takes so long to rectify.