This 4-hour course aims to equip private bankers with the right tools to better understand financial statements for the purpose of supporting their clients’ KYC as part of the regulatory expectations to have adequate corroborative evidence to support the net wealth of their clients.
Target Audience
- Assistant Relationship Manager, Relationship Manager and Senior Relationship Manager in Private Banks
Course Objectives
- Able to understand the implications of financial statements with regards to assertions made to support client’s wealth and/or journey to wealth.
- Better use of corroborative evidence to corroborate client’s KYC.
Course Outline
Understanding Financial Statements (AML perspective)
- Identify entity on statements
- Consolidated group of companies or distinct entity
- Audited vs Unaudited
- Time dimension (multi-year statements)
- Stated nature of business
- Shareholding disclosure
- Profitability of entity
- Cashflow implications
- Related party transactions
- Reserves of entity
- Distribution of business income
- Distribution of equity (dividends, etc)
- Notes on disclosures
Other Considerations
- Independence (audited vs unaudited)
- Credibility (jurisdiction and issuer of statement)
- Reliability
- Relevance
- Verifiability (market news)
- Do the statements correspond with the KYC?
- Feasibility of the assertions made by the statements
- Consider tax angle to income distribution
- Consider capital controls with regards repatriation of profits and/or capital
- Parent-subsidiary-associated companies relationships
Next Steps
- Accept/Reject
- Conditional acceptance with further evidence and/or monitoring
Pitfalls in interpreting Financial Statements (FS)
- Not the same entity (entity with similar name provided, e.g. PIC Asset Pte Ltd’s FS provided for PIC Pte Ltd business)
- Years of profitability do not correspond with KYC
- Nature of business does not correspond (e.g. building and construction reflected in KYC but revenues are from agency commissions in FS)
- Percentage of net equity ownership does not correspond to KYC ownership assertion
- Investment ownership double counted, (e.g. commercial property is reflected in Balance Sheet (company owned), yet KYC has the value of property reflected as well)
- Dividend distribution claimed in KYC not reflected in FS