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Structural Prerequisites PowerPoint Presentation
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Structural Prerequisites

Structural Prerequisites

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Structural Prerequisites

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  1. The Money Transmitter Compliance ProgramA Quick Training for Compliance OfficersPresented by:Juan Llanos, CAMS - juanbllanos@hotmail.comAlan Unangst, CAMS - aunangst@crowechizek.comFabio Fernandez, CAMS -

  2. Juan Llanos, CAMS Structural Prerequisites © 2006 Juan Llanos

  3. Juan Llanos, CAMS Form Handbooks, written policies, talk (lawyers, public relations) Substance Operationalization, quality, walk (compliance officers, managers, leaders) © 2006 Juan Llanos

  4. Juan Llanos, CAMS How L+C+H Interrelate • Leaders and founders role model acceptable behavior and influence hiring, i.e., their actions and omissions create… • Culture, in turn, is assimilated by employees through socialization and observation, and is reinforced via… • HR practices and omissions: selection, performance evaluations, training, promotion, etc. Bad leadership = unhealthy culture Unhealthy culture = Enron, Riggs, AmSouth, etc… © 2006 Juan Llanos

  5. Juan Llanos, CAMS Principles / Beliefs • Compliance • must be a C-level position • is cross-functional / -hierarchical • is an investment center • must be operationalized in business processes • is more about attitude and behaviour than about knowledge of laws and facts • Leaders’ actions and omissions –the tone they set from the top– have an enormous impact on the organization • Leaders must actualize commitment by providing authority, resources and public support • Ultimate responsibility lies with the Board © 2006 Juan Llanos

  6. Juan Llanos, CAMS Evolution VALUES AND CULTURE REGULATORY RELATIONSHIP Minimum Standards As little as can get away with Unthinking, mechanical Policing Enforcement lesson Basic training Compliance Culture By the book Bureaucratic Supervising / Educating Look for early warnings Themed, focused visits Beyond Compliance Risk focused, self-policing Ethical business Educating / Consulting Culture development Lighter touch Values-based Spirit, not just letter Focus on prevention Strong learning Mature relationship Reinforce best practice Benchmark Reallocate resources to problem firms © 2006 Juan Llanos Source: Financial Services Authority, UK

  7. Using the Risk Assessment to Drive your AML Program • Identify Specific Inherent Risk Categories • Products/Services and related entity agreements - complexity • Agents – training, experience, supervision/compliance reviews, record keeping and contractual agreements • Customers – identification requirements, recordkeeping and volume • Geographic Locations – regional/national vs. international • Transaction monitoring systems – automated/manual, aggregation • Transaction Volume – frequency, amount and tracking capabilities • Investigations and filing Suspicious Activity Reports (SARS) • OFAC – compliance, review and timeliness of reporting requirements, SDN lists • Organizational factors including your size, market share, structure and complexity of your business • Correspondent Accounts – documentation and settlement

  8. Using the Risk Assessment to Drive your AML Program • Risk Rank Each Category • Use available data and document workflows • Interview process • Identify greatest inherent risk categories • Risk rank high/medium/low • Gap Analysis • Review status of outstanding independent audit findings/exams • Identify new issues • Non-compliance with internal policy or regulations • Violations of law (VOL)

  9. Using the Risk Assessment to Drive your AML Program • Managing Risk • Project Planning/Execution • Written Policies and Procedures • Monitoring/Self Testing • Internal controls • Transaction Monitoring Systems • Agent location compliance reviews • Reporting and record keeping • Training • Initial and periodic updates and documentation • Adequacy - Does it work/Did you test it • Remediation • System and procedural enhancements • Allocation of resources • Enhanced Due Diligence • Independent Audit • Frequency • Scalability

  10. Using the Risk Assessment to Drive your AML Program • Questions to ponder • Is your organization actually taking a risk based approach to it’s AML program? • Is the AML Risk Assessment at a granular enough level that the business can actually use it to balance risk, operational efficiency and profitability? • Has the unique AML risk profile for each business unit been reviewed as to high risk agents (customers), services and geographies? • Are AML training, testing and monitoring programs based on your AML Risk Assessment? • Is management involved in your AML program? • Is your Risk Assessment periodically updated? • Are AML Risks reviewed for all agents/customers? • Are AML Risks considered in the development and pricing of new services before they are implemented?

  11. Juan Llanos, CAMS © 2006 Juan Llanos

  12. Critical Elements of AML Supbrograms AML Compliance sub-programs are, in essence, independent components of your company-wide AML Program that establish a reasonable and practicable framework for acceptance, monitoring and termination /reporting of: • Clients: Customer Identification Program or Know Your Customer • Agents: Know Your Agent (KYA) • Correspondent Banks: Know Your Correspondent Bank (KYCB) • Employees: (KYE) • Also others such as independent auditors, acquisition targets, etc.

  13. Critical Elements of Your KYC Sub-program Step 1 (Ground ‘0’):Establish a “reasonable” and “practicable” customer identification program (CIP) or Know Your Customer (KYC) policies, procedures and internal controls that…Step 2:Properly identify and verify customers before every transactionStep 3:Monitor activitiesStep 4:Report suspicious transactionsStep 5:Decisions to terminate, to block or to include a customer in the company personal SDN listIn all steps and throughout the customer life cycle: KEEP RECORDS!

  14. Critical Elements of Your KYC Sub-program The CIP must be used in connection to your firm’s Suspicious Activity monitoring, investigation, determination and reporting process

  15. Critical Elements of Your KYC Sub-program Common Weaknesses Found in KYC Sub-programs • No written program, improper training or communication to key staff • Culture of circumventing the system • Program fails to collect minimum identifying information or only requires minimum information above a certain threshold amount • EDD based solely on requesting more documents without proper verification and authentication of information provided • Client “constellations”: By altering few letters on his/her first or last name, same individual creates different sender/receiver accounts in your system, sometimes even using fraudulently altered IDs and wrong information.