Knowing your customer: the Art behind the Bluster

Much Has been made of the government's attempts to halt the flow of laundered money in the UK markets. The rallying cry of KYC (Or Know Your Customer) was heard a lot when the latest Anti-Money Laundering legislation came in but it meaning had been somewhat distorted from the original usage.

Knowing your customer has always been less about compliance and more about protection for the vendor. You have terms and conditions which grant you legal protection by defining the limits of what is your responsibility and what is not, and a contract document to identify firstly who you have the agreement with and secondly that they actually agree to it and when. How do you know that the subject that have a contract is who you think it is?

Now that there is a legal requirement to check that you know where your sources of income are coming from Never before has it been so important to be sure that you are dealing with the correct entity. Take things like simple name confusion.

Say you received an enquiry from a small publisher for goods. (There is no particular reason for picking this subject, It was the simply the first I found in our database. I am make no comment on the Companies I have listed other than they have names which could be confused .) Here are some good candidates for entities that match your prospective client.

• WESTERN AFRICA MAGAZINE LTD
• WESTERN AFRICA MAGAZINE LTD
• WESTERN AFRICA MAGAZINE LIMITED
• WESTERN AFRICA MEDIA GROUP UK LIMITED

But how to tell them apart? You will of course have obtained some billing details and some delivery details, but to know who you customer is you will need to check their details against the statutory registers to confirm they are accurate.
Referencing agencies offer a good one stop shop for verifying Applications for Credit within your industry, and also for satisfying the paperwork that substantial cash sales generate.  Any Sale for which you provide goods and or services prior to payment being received is being done on credit, and the credit is purely at you own risk.

Getting independant verification of the client's details brings you more comfort that you have recourse should anything go wrong, and that any remedy is directed at the right entity.

Engineering set backs in the midlands.

Hampson industries have decided to put put themselves up for sale, in a move which comes as no surprise to this writer. The company has been struggling with  large debt burden for some time and the news that they will be delaying in delivering on their contract with Boeing, their single largest contract is a cause for some concern.

That Hampson retained substantial losses of nearly £30 million last year is no secret, but it seems that unlike in their previous poor year in 2009 the shareholders don't have the stomach for another struggle to return the business to profit.

the sale is likely to involve the break up of the companies holding with the components supplier BHW and the operations in India already having interest from prospective buyers.

Little chef set to become Littler Chef…

With RCapital deciding to throw in the towel on the rescue of the beleaguered roadside restaurant chain Little Chef we are reminded that not every rescue plan is successful.

The issues surrounding the failure of Little Chef are many but the tipping point has come as the business is attempting to renegotiate its leases for its sites. It looks like despite the offers to renegotiate the rentals from the their landlord and one time owner the affordable hotel chain Travelodge, a large number of the sites occupied by Little Chef businesses are owned by offshore property groups who seem to be unwilling to cut their prices.

The decision to use a “pre-pack” administration to break off the profitable segments of the business will cause the likely closure of up to 66 of the 161 sites, in stages as viability is determined. As these less cost effective sites are closed a buyer will be able to purchase the remaining 95 money making sites enabling RCapital to recover some of their £10 million they spent on the business in 2007.

The real losers in all of this are again the staff who stayed with the company and have the misfortune to find themselves on one of the most unprofitable sites, and of course the unsecured creditors. That is to say the suppliers of goods and services that makes these restaurants and franchises work. By this writers calculation the job losses due to the closures will be in the region of 500 (based of the percentage of sites claimed to be closing and the numbers in the business at the time of writing).

So today we see another blow to the already shaky service industries.

White knights are like London buses....

A new bidder as stepped forward for troubled fashion chain Peacocks
Peacocks, which is currently in administration, has over 500 stores and nearly 40 concessions. They and parent company the Peacock Group, failed under their mounting debts last month in the biggest high street collapse since Woolworths, placing nearly 7,500 jobs in jeopardy.

Textile Magnate Alshair Fiyaz whose family wealth purports to be in the region of £3 billion appears to be working with Danish investment fund Solstra Capital, who are expect to submit a bid in the second round of bidding for Peacocks this week.

From their beginnings as Warrington’s own Peacock's Penny Bazaar in the back in the 1880’s, to their 1940’s move to Cardiff the business has been a constant presence on the UK high street.

In the 1990s the business expanded floating on the London Stock Exchange in 1999. The Peacock Group also took the decision that they would purchase low-cost retailer Bonmarche in 2002.

But despite strong trading, the hedge funds owned company has suffered as its profit margins came under pressure from the frenzy of discounts on the high street being offered by retailers desperate to beat the loss in high street sales. The retailer also racked up £750 million of borrowings.

KPMG has announced 249 redundancies from Peacocks head office in Cardiff.

Fashion chain Bonmarche, previously part of the Peacock Group, was sold last month in a deal that will save 230 store and 2,400 staff from redundancy, to Private equity firm Sun European Partners.

As always the devil is in the details....

If we ever need reminding why we must always consider the ethical obligations under which we operate as small and medium enterprises a salutary lesson comes in the form of the recent news that workers at the publically embarrassed company Autofocus Ltd will now be the subject of contempt of court hearings. Allegations have been sent to the Attorney General regarding the conduct and evidence during the previous case with Accident Exchange.

Autofocus was used by insurance companies to investigate the cost of replacements hire cars in claims involving the victims of motor accidents. It’s evidence which involved the testing of rates charged by credit hire companies to establish whether a bill was put forward in thousands of court cases.

The calls promised by autofocus were not being made to establish a fair rate for the hire of vehicles and fictitious rates were inserted into previously prepared reports

Now we can all see the flaw here, that the company being contracted rather than providing the service which it said it was providing, just provided something that gave the appearance of the contracted product. Now the issue here is that it is not difficult to imagine that with two identical claims in the same time period that the circumstances and the pricing will be the same and the same comparison numbers could have been provided, without causing the client any harm at all. The same sets of comparison could have been reused several times, reducing the cost incurred and increasing the speed of response, neither event a particular issue more of a positive result really.

However this sort of behaviour is the start of the rot as it were, Autofocus had obligated themselves to do the work, and Accident Exchange had a reasonable expectation to receive the figures that they had asked to be gathered. Autofocus had no idea whether any duplicated or derived figures would be sufficient and couldn’t without returning to the brief and doing the job as described.

The lesson to take away from this is that you should always review any processes that you have, for compliance with any contracted or legal requirements on a regular basis.
The examples above occurred over a 4 year period so the problems could have been addressed much earlier, prior to where Accident Exchange were so considerably exposed.

Estimates show that a potential of 20,000 compensation cases could be affected Accident Exchange suggest that £50million pounds of additional costs could have been incurred.