From KYC to KY3.- The new anti bribery and corruption regulations in the US and the UK

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Know Your Customer or KYC, predominated on the hyper regulated financial and legal profession in the 90s. Now that you Know Your Customers, it is time to start thinking in Knowing Your “Third Party” or KY3, and what are they doing for you.

As prosecution on acts of bribery and corruption is top in the agenda for the UK and the USA, a new compliance framework is being developed, specially for those trading in emerging markets, or in well established markets with sophisticated corruptions systems.

Bribery and corruption are rapidly establishing themselves as a permanent part of the financial crime portfolio as the UK and US begin to lock-step both legal practice and enforcement. Keith Korenchuk and Oliver Kerridge of Arnold & Porter LLP talk to MLB editor Timon Molloy about the transatlantic lessons and risks. In November MLB article Brown Envelopes, Timon Molloy says that “…adequate procedures to defend the business against a charge of failing to prevent bribery will mean applying a risk based approach to identify the areas that need specific attention and tailoring appropriate controls.

“It’s a transition from know your customer – KYC – to KY3, ie, know your third party and what he or she is doing for you,” says Korenchuk. Financial institutions are concentrating heavily on their third party relationships, Kerridge confirms: “Some are finding that they know them better than they do their own customers, which can cause some internal astonishment.” If so, there is pressure to revisit and improve the KYC process.

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