AML/CFT: KYC/CDD requirements contribute to Peacocks failure
If there were two retail chains that seemed ideally positioned to handle a recession, it would have been Woolworths and Peacocks. Neither were bottom-feeders but both aimed to provide good quality product at affordable prices. Woolworths failed with the UK's largest number of redundancies. Now, Peacocks has been pushed into administration. Amongst the factors that stalled a rescue were counter-money laundering requirements. And it raises issues as to counter-parties.
Media reports surrounding the collapse of Peacocks, a clothing retailer with more than 600 retail outlets, blame a range of factors for the failure of last minute negotiations which would, if the reports are correct, have valued the company's debt at 28% of value. Several issues arose, including in relation to a sale of a subsidiary (which is not in administration), cash in hand at shops and, tellingly, the accountants who would pick up the large administration job, not being able to produce confirmed figures.
The banks behind Peacocks have supported it through difficult times in recent years but, like many UK retailers, it has suffered as supermarkets have moved, in an ever-larger way, into the low- mid-range clothing market. The one-stop shop with a car park by the door has caused the failure of thousands of small businesses but its impact on large, single product chains is relatively undocumented. What is becoming clear is that the mass market is being served by the supermarkets and the niche markets suffer due to lack of passing trade.
As the CEO of Peacocks struggled to put together an agreement, at his shoulder was a financier who has, so far, not been publicly named.
The banks, who would be taking the money from the un-named financier became cautious. According to UK broadsheet "The Telegraph" one banker told the newspaper "Given where we are in terms of anti-fraud regulation and know-your-customer criteria, this increasingly became a hard deal to do."
This may be the first time that counter-money laundering laws and regulations including customer due diligence has sunk a large scale corporate rescue.
And it demonstrates that financial institutions are paying attention to counterparties as much as to those they directly do business with.
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