In the first article of the year to do with compliance recruitment, our expert describes the stepping stones that a KYC contractor can traverse to find more lucrative employment. He also looks at the part that section 166 Financial Services and Markets Act 2000 plays in generating employment in compliance and warns banks about the effects that IR35 might have on their access to compliance talent.

In recent months, I have seen a great desire among KYC (know your customer) contractors to move away from 'KYC due diligence' (which is relatively menial) to more fitting financial crime jobs. People often come to me and ask where to find a good stepping stone between the one type of job and the other. I always suggest that they should think of becoming a CAMS (the relatively cheap qualification offered by the Association of Certified Anti-Money Laundering Specialists) or gaining the diploma offered by the International Compliance Association, but I often tell them to consider applying for EDD (extra/enhanced due diligence) jobs as well.

By the term 'KYC contractors' I am referring to people who do the basic job of verifying information and checking to see whether documents are correct during the onboarding process and at other times as well. EDD jobs are a step up from this in terms of pay rates, difficulty and interest – they often involve cases and clients fron highly risky jurisdictions, so-called PEP checks (i.e. research to do with "politically exposed persons"), sanctions and negative news searches. Their jobs require more intuition and experience and less in the way of box-ticking. When someone in an EDD job researches a prospective HNW client, he has to look at that person in the round, whereas a normal KYC contractor is used to merely being handed a batch of files belonging to several people and having to check their veracity. The EDD man is required to make an informed recommedation to his superior, the MLRO (money-laundering reporting officer), instead of merely checking for ones and zeros or yesses and nos. The transition from one type of job to the other is definitely a leap of faith.

Confusion sometimes reigns when someone wants to make that leap and visits job websites. An EDD job is sometimes listed merely as "due diligence" and a job seeker can easily confuse it with a normal KYC due diligence post, i.e. the same as the one that he already has. My tip for such a person is to look through the spec and ask himself whether it mentions transaction screening, souce of wealth, source of funds, PEPs or sanctions.

Performance measurement - why it matters

What happens to the career of a KYC analyst if he is reprimanded or punished for bad performance? The good news here is that no KYC analyst is really liable for getting a file wrong - that is the job of the approved persons at his firm. He himself works with the front office all the time - in other words, with the smooth-talking relationship managers who give him the information. Once he receives it, he acts as a second pair of eyes. When his job is done, the information then goes on to a four-eye check and there is often a fourth layer of checking beyond that. Most teams that do this work have to satisfy KPIs or key performance indicators. If they work in a "quality-over-quantity" regime, they do have targets that they have to fulfil. A really good KYC analyst should have about 95% of his packs signed off first time by the quality assurance team or the MLRO.

Analysts in the top 20% of their firms' productivity rankings are very sought after. Every bank has a different way of rating its people for this and productivity is not the only indication of a good or bad analyst - some work slowly but are real sticklers for accuracy. When evaluating the worth of a KYC analyst, I first inquire about the countries of origin of the clients he has onboarded, then I look at the type of client. Some banks are very specific in their demands for people who (for instance) know a good deal about Iranians. HNW individuals, too, fall into many different types (entrepreneurial and non-entrepreneurial, for example) but I do not trouble to ascertain which types the job applicant has processed, because that kind of classification is only pertinent during "source of wealth" checks at banks.

Who's hiring whom

Recruitment firms, including mine, do not deal very often with family offices. This is because these organisations tend to be small (although middle-sized ones do exist), lower in profile and with a slower turnover of staff.
 
One factor that does cause plenty of hiring is the ubiquitous section 166 review, especially when a bank hires one of the 'Big 4' accountancy firms as the 'skilled person' with the job of arranging it. When a bank hires one of these giants to conduct a 's166' at the behest of the regulators, the accountancy firm consults its list of favourite teams and asks them to perform various tasks under its umbrella, but it also goes to recruitment firms to find talent. 'Big 4' firms slap mark-ups on these people, however, so my firm does not do a great deal of business with them; when organising recruitment on compliance desks, we do 90% of our business with end-clients.