International Registry Proposed for Enhanced Due Diligence

Financial institutions would benefit from an "international registry" for enhanced due diligence documents, according to industry insider.

Financial institutions would benefit from an "international registry" for due diligence documents, said Martin Steinbach, managing director and sector head, global services, at UBS AG, Switzerland.

An international registry would "act as an actual repository for those documents from each bank that are needed for due diligence," said Steinbach. The envisioned system would allow financial institutions to add documents to the system in electronic form.

Enhanced due diligence, or EDD, has become a requirement in international banking under the USA Patriot Act and its counterparts in other nations. For each account, financial institutions must delve into questions of ownership, involvement of politically exposed persons and downstream correspondent clearing. Furthermore, it's not just a one-time effort but an ongoing requirement to stay current about customer activity.

However, the information required to satisfy regulators resides at several financial institutions. Therefore, an institution conducting EDD has to chase down numerous documents from numerous parties in different time zones. The result: higher costs.

That's one of the attractions of an international registry. "This solution would help ease the administrative burden on all of the financial institutions," said Steinbach. "I'm convinced it's the only way to handle due diligence in a manageable fashion."

Swift, an inter-bank communications network, was suggested as part of the possible infrastructure for the proposed international registry.

Steinbach spoke at the BAFT Midwinter Strategic Issues Conference on Jan. 29. He is a member of the Wolfsberg Group, a global anti-money-laundering organization comprised of several leading international financial institutions.