Anti-Money Laundering

Transcription

1 Anti-Money Laundering Risk Assessments as a Key to AML/BSA Compliance AIBA Quarterly Meeting March 2008 January 2006

2 About edelta Consulting edelta Consulting, Inc. is a full service consulting firm formed in We provide professional services and extensive expertise in financial, operational and technology risk and compliance. Our team brings decades of experience from Big 4, Fortune 500 and government entities. edelta consistently provides its clients with senior level guidance and the highest quality professionals. Enterprise Risk Management Regulatory Compliance Internal Audit / Self-Assessment IT Governance and Control Information Security System Implementation/Integration Litigation Support / Data a

3 About JWIC Consulting Carlos Gutierrez, CAMS, is a former regulator with the Federal Reserve and Executive Director of JWIC Consulting. Carlos has extensive experience in examining global financial institutions, financial holding companies and their domestic and foreign investment bank and non-bank subsidiaries, including broker/dealers and limited purpose trust companies.

4 $1 Trillion Laundered every year by drug dealers, arms traffickers and other criminals. Regulatory expectations and pressures growing. Major challenge for the banking sector, as gatekeepers to the legitimate financial system.

5 GLOBAL AML RISK ASSESSMENT OBJECTIVE To provide participant (s) with an overview of Enterprise-wide AML risk assessment processes while finding ways to minimize expenditures on monitoring and investigations.

6 Agenda U.S. Regulatory and International Standards Current regulatory issues on AML riskassessments Correlation of Risk Assessment results to AML Operational Strategies How to succeed in performing AML risk assessment Top-level overview of risk assessment process How to identify residual risk Sample risk assessment reports How to cut your expenditures on AML investigations?

7 AML Regulatory Issues No risk assessments performed /documented Not included in the risk assessments All products and entities All major risk categories Methodology for assigning risk levels lacking (customers) Policies and Procedures did not include Frequency of updates/reassessments Correlation of BSA/Risk profile with CDD/EDD, transaction monitoring

8 Civil/Criminal Penalties - US No. of Enforcement Actions No. of Actions Citing Risk Assessment Deficiencies

9 Risk Assessment Formalized, Documented Process A formal process that considers all elements, stakeholders, inherent risk, and residual risk within a documented, defensible and maintainable form.

10 Correlation of Risk Assessment to AML Operational Strategies Risk Assessment Program Development & Execution Risk Reporting

11 Key Stakeholders BSA/AML Officer Internal Audit AML Steering Committee Risk Assessment Information Technology Regulators LOB Executive Management

12 Requisites to Success Management support/sponsorship Active Participation from key stakeholders Identification of relevant risk categories/factors Comprehensive in terms of depth and breadth Applied consistently throughout the enterprise Consensus of LOB executive management Approval by the appropriate committees Risk philosophy and risk assessment methodology are clearly described and documented

13 Program Development & Execution Formally Linking Risk Scores to Practices Policies Procedures Control Design Technology Enablement Evaluation Resource Evaluation Differentiate Training CDD & EDD Ongoing Transaction Monitoring Build the AML program to have linkage and connectivity to the risk assessment. Focus on risk and improvements areas, and avoiding a turnkey over-controlling of program elements.

14 Risk Reporting Escalation Evaluation SAR Report Internal Metrics Reporting is key to managing operational risk, regulatory need, and to influencing future risk assessments

15 BSA/AML Risk Assessment Approach Planning Information Gathering Risk Rating Reporting Aligning Project Management Ongoing Communication with Key Stakeholders

16 Primary Risk Assessment Factors Client Types Geographies Products and Services Distribution Channels Funds Flow Transaction Documentation Terms of Settlement or Delivery

17 Secondary Risk Assessment Factors Suspicious Activity Reports (SARs) Filed 314(a) and 314(b) referrals Subpoena Volume OFAC Blocking and Rejecting Activity

18 Quality of Risk Management, Mitigating Factors Organization Structure and Tone IT Infrastructure & Transaction Monitoring/Surveillance Capabilities LOB-Specific AML Policies & Procedures Employee Training/Awareness Results of Prior Internal and External Assessments

19 Thoughts Risk Assessment Ability to right-size controls and not overinvest Provides a tool for monitoring changes that could impact your institution s risk profile Opportunity to foster new relationships or strengthen existing ones Promotes greater dialogue and transparency with your key stakeholders Demonstrates your knowledge of the institution

20 Why do we need AML risk assessment? Safe and sound banking practice Basis of establishing AML compliance program Appropriate allocation of compliance resources and cost associate with ensuring compliance Regulatory focus/ avoid fines and penalties, reputation damage

21 PRIORITIZATION OF CONCERNS: SENSITIVITY URGENCY GROWTH POTENTIAL Rating: Low (1-3); Medium (4-6); High (7-9); Very High (10)

22 The Enterprise-wide Compliance Risk Assessment (EWCRA) The framework encompasses: Measuring an organization s risk across all activities; Operating as a tool to drive consistency; Functioning as a common body of knowledge; Aggregating risks across the entire organization and reporting collectively on risks; and Providing senior executives with an integrated approach to prioritize higher and lower risks to the organization.

23 What s ahead? Much has been achieved, there is still much to do to make the financial system more robust in the fight against money laundering Increased product complexity Increased involvement in emerging markets and integration of mergers

24 Conclusion The issue of AML is one that continues to present a challenge for banks. From ensuring the appropriate tone and profile is set by senior management, to the alignment of operational processes across a complex business, the challenges faced by banks continue to evolve, as do the regulatory environments in which they operate.

25 Contact Information Carlos C. Gutierrez, CAMS JWIC Global Consultants (917) Jon Bosco edelta Consulting Mobile: