Legal
Knowing who you are working with
In some activities, taking on a client means checking who they really are — and doing it before you start.
A new client arrives with an urgent job. Documentation gets requested «as we go», because nobody wants to open by raising objections. Three months later, when things get complicated, it turns out all that is known about the client is a trading name — and that whoever was signing did not hold the authority they claimed.
Beneficial owner
The natural person actually behind it. Not the director who signs nor the company on the contract: whoever controls. Identifying them is precisely where a superficial check parts company with a real one.
The four steps, and where people skip
| Step | What is checked | The shortcut taken |
|---|---|---|
| Who they are | Identity of the person or company | Accepting whatever the introduction email says |
| Who really controls | The beneficial owner behind the company | Skipped once the structure has two levels |
| Who may sign | Current powers and their scope | The power is read, its currency is not |
| Where the money comes from | Source of funds, depending on the case | Assumed, because the client «is known to us» |
Important
The rule that avoids 90 % of the trouble is about timing, not content: **the check happens BEFORE starting, not alongside**. Once you have worked for a month, saying no is an expensive decision, which is why it almost never gets taken. Starting without checking is not gaining time: it is giving up the only window in which saying no is cheap.
What makes the file useful later
- 1
Keep what you checked and WHEN
Undated, you cannot show it happened before starting.
- 2
Note what you could not check, and why
An explained gap is defensible; a silent one is not.
- 3
Review whenever something changes
Change of director, of ownership, of activity or of how they pay.
- 4
And look again periodically even when nothing changes
A four-year-old check describes a four-year-old company.
Watch out
The most repeated blind spot is the long-standing client: **reviews are run on new clients and never on old ones**. The file of the client of eight years holds day-one documentation, and in those eight years they have changed owner, sector and billing country. A periodic sweep of the old portfolio turns up more than ten checks on new arrivals — and it is precisely the one nobody schedules, because there is nobody waiting on the other end of the phone.
When something does not add up
Worth knowing
Who counts as an obliged entity, which checks correspond to each case, when there is a duty to report and what may NOT be told to the client is set by anti-money-laundering rules and their implementation. **Your adviser or compliance officer settles that, and it is not improvised**; here we cover the documentary side: check first, keep it dated, and look again.
›Does this apply to my activity?
It depends on sector and transaction. That is exactly the question to take to your adviser beforehand.
›How often do I review long-standing clients?
On a frequency you set, and whenever something relevant changes.
›Can I start while completing the documentation?
It is the most expensive decision available. If taken, take it in writing and with a deadline.
A real case
The situation
A new client arrives with an urgent job and documentation is requested «as we go».
What you do
- Completes the check before starting and records the date on file
What you get
If saying no is required, it gets said while it is still cheap.
The situation
The file of an eight-year client holds day-one documentation only.
What you do
- Schedules a periodic sweep of the existing portfolio, not only of new arrivals
What you get
Changes of owner, sector or country stop going unnoticed for years.
The situation
Whoever signed for the client held a power of attorney that had been revoked.
What you do
- Checks that the power is current, not merely that it exists, and records the date
What you get
What was signed stands, because it is on record that the signatory could sign that day.
The situation
Work starts without checking who with.
What you do
- Runs the checks before accepting
What you get
The decision is taken with information.
The situation
There is no record of what was checked or when.
What you do
- Records the checks performed
What you get
The decision is explicable afterwards.
The situation
The information is checked once and never again.
What you do
- Schedules a periodic review
What you get
The record stays true.
This article answers
- client identification before starting
- beneficial owner documentation
- obliged entity what must i check
- client acceptance file