The Basel Committee conducted a research survey in 1999.  This survey focused on the internal workings of banks throughout the world, in regards to their practices of due diligence and how well they practiced the know your customer policies and procedures.  These procedures have been in place in financial institutions for many years, and are a few of the ways that banks ensure that they are not unknowingly involved with people or businesses that are committing illegal acts of corruption such as the financing of terrorists or money laundering scams.  Bank managers and presidents are aware of the importance of these policies, and are working with their employees to make certain that the new and existing customers have reputations that are clean and above board.

For not only is there the threat of a significant loss financially, they may be held criminally liable in cases of fraud and corruption themselves.  What was found in the 1999 survey, was that at that time, there were many deficiencies in the practice of due diligence when it involved foreign banking procedures.  In some countries, they did not even have these policies in place and in other more developed countries, the gap between the policies and the enforcement of those policies was great.

They printed out a guideline book, and distributed it bank managers, in the hopes that the rules and the laws would be better understood, and therefore easier for those institutions to implement their own procedures.  This differed from that which was put out by the Financial Action Task Force. The FATF guidelines were about avoiding the legal consequences of not practicing due diligence while the Basel Committee’s guidelines focused more on the protection of the reputation of the institutes.  The business that a bank may lose if it is found out that they had been involved in acts of corruption, whether or not they were aware of it, is detrimental and has been the ruin of banks and businesses in the past.  The key is to allows know with whom one is becoming involved with and to practice the gathering of the knowledge with due diligence.

Post from: Do It Go

Insurance Against Acts of Money Laundering

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