The Russian incursion into Ukraine has added significantly to the challenges of effective CDD solutions for Compliance professionals. Panelists at the Dow Jones Global Compliance Symposium in Washington, D.C., early this week warned institutions that OFAC will need evidence of careful attention to KYC/CDD by institutions doing business with customers whose owners appear on the sanction lists.
Ben Dipietro reported in the Wall Street Journal that experts advise institutions to assertively apply KYC solutions and strategies to determine ownership of business customers and to hire investigators to investigate further when ownership is not entirely clear.
According to Dipietro, OFAC Associate Director John E. Smith further advised that customers that withhold or prevaricate on providing ownership details should immediately raise concern regarding KYC due diligence.
Panelist Judith Lee, a lawyer with Gibson Dunn & Crutcher, emphasized the importance of transparent and assertive KYC/CDD practices: “It’s important to make the case to OFAC that you tried to make a reasonable effort at doing due diligence…It’s hard to persuade OFAC if you don’t do anything,” she said.
Panelists tended to agree that the lack of financial transparency and varying cooperation and support for sanctions among different countries make conducting CDD more difficult, but the onus remains on financial institutions to know their customers and to proactively design and apply their CDD solutions to all customers and especially to customers in a new sanctions environment like the one evolving in Russia and Ukraine.
