Fact or fiction?
I can perform simplified due diligence on law firm clients.
Fiction: Every client must be assessed individually. While some law firm clients may qualify for simplified due diligence, you cannot assume that all do. You must evidence low risk factors and consider the nature of the work involved. Remember that even regulated or supervised firms can present higher risk situations depending on their clients or services.
I must perform ongoing due diligence annually for a normal risk client.
Fiction: Not necessarily. The regulations require due diligence to be carried out on a regular basis, but not specifically every year. The frequency should be determined by the client’s risk rating, for normal risk clients, reviews may be up to every three years. Annual checks are common because they align with the accounts cycle, but they are not mandatory. What matters is that your policies and procedures are followed, and that you identify and act on any trigger events (for example, significant changes in the client’s circumstances).
I can place reliance on the previous accountant's CDD.
Fiction: You might be able to rely on another party’s CDD, but it’s unlikely. To do so, there must be a written agreement, and the other party must be a regulated entity in the UK. Even if those conditions are met, you are still responsible for carrying out robust customer due diligence and assessing the client’s risk. The person you are relying on must agree to give you/ your firm access to the documents they have in relation to the CDD. But if you do decide to rely, you need to be able to prove that you’ve met all the requirements, including having the proper agreement in place, because one of our reviewers could ask for evidence. Think carefully before deciding to place reliance.
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