: : : Compliance : : :

There is no central market and no global regulatory agency responsible for monitoring the activity of the currency markets. At Kerford Investments Limited, we see new registrations and memberships with financial overseeing authorities as part of a development plan.

We believe such undertakings will bring recognition and networking opportunities that enhance our ability to serve the client. Kerford is accountable to the stringent standards of capital adequacy and financial reporting enforced by various overseeing and competent government authorities in various parts of the globe, wherever it has established its presence.

Financial intermediaries possess considerable information on their creditors, particularly when they provide a wide range of financial services and thus build up a picture of clients' assets and activities. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, non-compliance with which could have a direct and material effect on the determination of financial statement amounts. However, multilateral and unilateral attempts to ensure timely reporting of transactions made by targeted individuals or groups, and to deny them access to the international financial system, have had limited success. This is mainly due to economic disincentives for the disclosure of the identity and purpose of transacting agents, particularly those using correspondent banking services, informal money transfer networks and offshore financial centres. Over the last decade the competitive forces associated with financial globalisation have tended to undermine this relationship. Attempts to exercise some form of regulatory control over scams and scandals imply that these informal networks will become either increasingly formalised or they will cease to exist.

Anti-Money Laundering Policy

In Kerford Investments, while handling customer funds equally has the accompanying responsibilities, including implementing proper anti-money laundering procedures and other compliance procedures prior and after enrolling a client into the books of Kerford. Kerford has developed anti-money laundering policies to ensure that company personnel comply with applicable laws and regulations when engaging in foreign exchange services to clients.

Kerford's Client Compliance Procedures includes being subject to the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. The company's anti-money laundering policies and procedures are designed to meet the requirements of the legislation wherever Kerford has established its presence by minimizing the opportunity for customers to engage in money laundering activities through transactions in the Forex markets. Kerford's procedures are focused on "knowing the customer". We require two forms of identification: (1) Picture identification, i.e. a passport or driver's license, and (2) One form of identification confirming the customer's address, i.e. phone bill or a utility bill.

International Banking System:

In the 'formal sector' of international banking, the weakest link appears to be the essentially self-regulated international network of correspondent banks. International correspondent banking exists in order that banks may provide a wide range of alternate services for their clients in territories where they have no established branches. This in turn makes these formal financial institutions vulnerable to unwitting collusion in money laundering activities. This problem is most evident when international correspondent banks engage partners domiciled in poorly regulated emerging market countries. These arrangements allow the transfer of both illegally and legally derived money from the unregulated into the regulated financial institutions, thus "allowing funds through the backdoor of the regulated institutions to commence or continue the laundering process"

Informal Financial Systems:

All informal Money Transfer Networks (MTNs) share a common set of operational characteristics, a "lack of records, customer identification or regulatory oversight, and the potential for misuse by UNKNOWNS". Unregulated small-scale money transfer networks are also used to transfer funds between commercial parties both within and across national borders. Specifically, they provide a rapid, reliable and relatively cheap means for migrant workers to remit cash to poor and illiterate families. Informal MTNs have further advantages over the formal financial system. First, they avoid the additional costs imposed by regulation of banks, for prudential as well as policing purposes.

Offshore Financial Centres:

International capital mobility makes criminal and terrorist funds transfer easier, particularly since these transactions can be obscured by the quasi-legal flows related to tax evasion, which require a similar degree of secrecy. The role of the tax factor in determining business location gives rise to wasteful tax competition for investment, particularly between small developing countries with a small business sector of their own, for whom the positive externalities of such investment are a significant source of national income, but who do not bear the externalities involved in terms of tax loss to other countries. The deregulation of cross-border capital flows also reduces or even eliminates the information about investors generated by licensing systems. Liberalisation also reduces the transactions cost of the use of offshore financial centres (OFCs) to channel cross-border capital flows through the incorporation of offshore holding companies. The object here is not so much to attract foreign investment as such, but rather the administration of assets and tax revenue. The use of these schemes is detrimental to both the home and host country through reduced tax revenues and distorted investment inflows.

© 2004, Kerford Investments. All rights reserved