Lindsay Columbo’s excellent post for the FCPA Blog (“How did due diligence ever become so complicated?”) articulated a set of thought-provoking observations that many of us working in the financial and legal sector, and who have compliance and KYC obligations, have been pondering for some time.

Lindsay draws attention to a number of anomalies that feature and affect our procedures from jurisdiction to jurisdiction. Sadly, there is no one-size-fits-all answer to this issue. However, we have to ask the question should there be, or perhaps can there ever be? Has the FATF, for example, really designed an effective set of core standards upon which to build a compliance regime that has been adopted across the globe, and which we are all following in order to optimally identify, disclose and ameliorate money laundering risks?

As Lindsay indicates, the problems are complicated further by the realization that due diligence is also affected by the particular risks facing the industry/business concerned. We can add to this mix the cultural personalities involved, their local psychological predispositions, their previous behaviors… the list is endless. So even if there is a desire for a one-size solution, it may be impossible to achieve.

One issue causing me to have reservations is that by standardizing a process, we may minimize the human element in the equation. By this I mean that those working in compliance all have their own professional traits, they are (or should be) able to read critically between the lines and develop a hunch. Conversely, there is also the possibility that those conducting due diligence checks would simply “comply” and no more, knowing that they had covered their backs by ticking the generic boxes.

There may well be software out there capable of running searches and ticking the boxes alluded to. But at this time, computers cannot develop a suspicion, a “feeling” that something simply is not as it should be. We have all faced situations where a bank account or corporate entity is being “fronted” by a man of straw on behalf of the controlling mind. Human interaction is fundamental to identifying such behaviors.

This is why those conducting due diligence, KYC and other obligatory compliance tasks should have systems in place that continue to develop dynamically as the playing field inevitably changes. These changes may simply be caused by a jurisdictional demand, or by the nature of the industry concerned. Despite all the training programs available both internally and externally, there is no substitute for experience, which also explains why veteran compliance professionals are in high demand.

The “one-stop-shop” covering due diligence needs (as Lindsay describes it) may theoretically be possible given the rapidly developing software systems on the market previously mentioned. But as she explains, this concept may also be flawed on a number of levels.

The pressure on compliance professionals, and indirectly the software companies providing support services, is immense. In some ways, the individuals charged with the responsibility will always have the sword of Damocles hanging over their heads. With every task and check comes the realization that you are damned if you do, and damned if you don’t. The conflict between profitability (or economic survival for an enterprise) and compliance can be intense.

It is not a profession that I envy due to the pressures being brought to bear. Lindsay is right to illustrate the problems that compliance systems face across the board. I wholeheartedly support her quest for a simplified global due diligence standard, but for all the reasons indicated above, it may be a long time coming.


Martin Kenney, pictured above, is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice based in the BVI and focused on multi-jurisdictional fraud and grand corruption cases |@MKSolicitors. In 2014 he was the recipient of the ACFE’s highest honor: the Cressey Award for life-time achievement in the detection and deterrence of fraud. He was selected as one of the Top Thought Leaders of the Legal Profession in 2018 by Who’s Who Legal International and as the number one offshore lawyer for asset recovery in 2017.

This article originally appeared in the FCPA Blog