On 4 May 2023, the owner of Wright Brothers Aircraft Title and Aircraft Guaranty Corp. was convicted of money laundering, wire fraud, and two counts of conspiracy to manufacture and distribute cocaine.

What does this mean for business and business aviation?

An increasing number of businesses are required to gather information and maintain up-to-date files regarding their client’s identity and funds. The reason is the ongoing international struggle to prevent international crime, money laundering and funding of terrorism.

The requirements for knowing your customer (KYC) are particularly high where the business provides corporate and/or trust services; this is because an arm’s length ownership vehicle may be created for the client (or at their request) to buy, sell, or own an asset. The service provider will often be legally required not just to identify the client as a real person, but also to establish how they made their money and where the money for this transaction is coming from.

Getting it wrong

Getting KYC wrong or ignoring it can lead to fines, loss of licences and jail. In the case of Wright Brothers, the service provider was seen as an extension of the criminal organisation they were facilitating and are being prosecuted accordingly.

Getting it right

Collecting client due diligence: While jurisdictional or industry specific KYC rules will often stipulate what forms of documentation are acceptable, the application of common sense is just as important. Do you really understand who this person is and the evidence that has been presented? Do you feel that more information is required to become comfortable? It is important that the people who could be held accountable are satisfied that the evidence is sufficient with the rules and to themselves.

Frequency: The collection of due diligence on a client provides a snapshot of a single moment in time. It is therefore important to update the information regularly as a client’s business activities and dealings can change rapidly and unpredictably. While some businesses may not want to engage overnight KYC screening services, it is easy and free to set up google alerts on clients and their assets. This will allow businesses to stay up-to-date and decide whether additional information needs to be collected.

Being active in KYC: The collection and frequency of information on a client is pointless unless it is considered in the spirit of which it is intended and backdrop of the penalties of getting it wrong. The benefits of having four eyes (or more eyes in certain high-risk circumstances) cannot be undersold; often the background and possible risks of client KYC are better explored when discussed with another person together with any solutions where information is lacking.

Conclusion

The collection of client due diligence should not be a checkbox exercise. Actively analysing and accessing the KYC information is a continuous exercise; not doing this can have disastrous results both for your business and personally.

As a colleague once said:

“The only way to serve your client properly, and represent their interests fully, is to know them completely.”