Thornmark Asset Management Inc.

Transcription

1 Thornmark Asset Management Inc. May 29, 2012 Slide 1

2 AML program aligning training to requirements Key steps to developing a successful training program are to ensure that you identify and interpret the requirements. This establishes the foundation for policies and procedures that are customized to your business and ultimately training materials to ensure that employees can carry out the requirements of the policies and procedures. PCMLTFA The Act Read Guideline s IDENTIFY REQUIREMENTS 5 Regulations Used to carry out the intent of the Act FINTRAC Guideline s Plain language guidelines to explain Act & Regulations INTERPRET REQUIREMENTS Consult Act/Regs, if needed Attend Seminars (PMAC) FINTRAC Interpretation Notices (FINs) Technical interpretation of certain provisions Hire Lawyers/ Consultant s DEVELOP AML P&P and TRAINING Slide 2

3 AML training requirements The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) requires that companies have ongoing compliance training. Who? If you have more than 1 employee, you need a training program Anyone who has AML touch-points (client-facing, transaction review, senior management, compliance personnel, IT personnel) What? Training program must be in writing Where/How? Delivered in any manner that best suits your company (face-toface, web, etc.) When? Business-specific, with requirement to train client-facing personnel before they are client-facing Why? Because potential fines and jail time are substantial! Slide 3

4 Thornmark AML training content and frequency Thornmark provides training to new employees as they are hired, to all employees annually, with more detailed training provided every 2 years. New Employee On-Boarding AML training specific to role PENSIVO training Annually PENSIVO training for all employees Every 2 years o o 1st Year AML Securities Dealers, Part 1: Legislative & Regulatory Requirements AML Securities Dealers, Part 2: Compliance & Suspicious Activities 2nd Year AML Securities Dealers, Part 3: Refresh and BDSC s Case Training at an office meeting o Using Thornmark s training document, including question and answer period Other As necessary, related to changes in regulations, p&p, or other developments Slide 4

5 Thornmark AML training audience and evidence of training More detailed training is provided to those in clientfacing and compliance roles and evidence of all training is kept on file. 2 groups Client-Facing (including compliance) o Training materials + appendices Non-client facing o Training materials Evidence of Training Training at Office Meeting o o PENSIVO Meeting minutes are taken to evidence meeting Each employee completes a sign-off sheet confirming that they understand their PCMLTFA requirements, have attended the office training and have completed the PENSIVO online training o Participants receive certificate signifying successful completion Slide 5

6 Thornmark AML training summary of 5 key training points Employees are asked to remember these 5 key training points. 1. Definitions Money laundering: any act or attempted act to disguise the source of money or assets derived from criminal activity Terrorist financing: provides funds for terrorist activity 2. ID Clients and Collect All Client Records Ensure that ID documents and client records are complete (follows Thornmark s regular processes) 3. Suspicious Transactions and Suspicious Attempted Transactions Thornmark is required to report when there are reasonable grounds to suspect that a transaction or attempted transaction is related to money laundering or terrorist activity financing o Review examples in training materials and understand how they apply to Thornmark s business 4. Be Aware of Third Parties and Politically Exposed Foreign Person s (PEFPs) When an account is opened, Thornmark takes reasonable measures to determine whether it is to be used by or on behalf of a third party or if the person is a PEFP 5. Potentially Large Penalties and Prison Time for non-compliance Failure to report a suspicious transaction could lead to up to 5 years imprisonment, a fine of up to $2MM, or both o Penalties for failure to report do not apply to employees who report suspicious transactions to superior Slide 6

7 Thornmark AML training examples Employees are provided with examples of things to look for that are specific to Thornmark s business Providing examples related to your business is a great teaching method, in order for employees to understand context Provide examples for placement, layering and integration Provide situations of when the company would expect a suspicious transaction report to be filed o Use key words: discomfort, apprehension and mistrust Use pictures to promote understanding: Slide 7

8 Thornmark AML training a few FINTRAC dos and don ts A number of PMAC firms have been through a FINTRAC audit recently and there are some consistent themes. Ensure that your AML materials are specific to your business Guidelines o Don t just copy and paste the FINTRAC guidelines and consider this your p&p manual Training o Don t take the FINTRAC examples from the guidelines without considering how they specifically relate to your business Risk Assessment o FINTRAC states that their risk assessment template is only a starting point and that companies need to specifically tailor for their circumstances Brush up on the details After submitting your required documents to FINTRAC, they will conduct a follow-up phone call in which they will ask very specific questions about the requirements (e.g., how many days do you have after month-end to file your terrorist report ) Slide 8

9 Thornmark AML training additional resources Other references To further quench your thirst for knowledge, please reference the following: Canadian Anti-Money Laundering Institute o o Training programs and designations IIROC AML document o o Comprehensive document, which provides requirements for securities dealers (note that some components are IIROC-specific) Money-Laundering-Compliance-Guidance-Oct-2010.pdf Slide 9

10 Thornmark Asset Management Inc. May 29, 2012 Slide 10

11 Anti-Money Laundering Compliance Training Your Employees May 29, 2012 Presented by Alana Dubinski, Stonegate Private Counsel, a division of CI Private Counsel LP

12 How Vulnerable is the PM Industry? Depends on your business model Products & Services Hedge Funds & Private Pools Offshore Funds & Accounts Use of Complex Account Structures Exempt distributions attractive to criminal elements due to lesser registration and prospectus requirements Proliferation of hedge funds due to profitability, limited liability in the case of LP s, lowering account minimums attract greater number of investors Deal in large sums of money minimum investment of $150K Offshore fund investors often use shell companies and trusts or complex structures making beneficial ownership difficult to identify Offshore funds are exempt from certain tax reporting and attract certain classes of investors that don t stand out amongst the same client base Pooling investor funds and paying out returns in proportional shares, as well as minimum hold periods makes it difficult to trace source of funds Source: Oracle Financial Services, Hedge Funds and Anti-Money Laundering White Paper, October 2009

13 AML Compliance Regime for PM s PM s AML compliance regime must be tailored to the risks of its business It s training program should respond to the types of clients it deals with and the products it distributes An effective training program includes, educating individuals to identify red flags in the course of opening new accounts/accepting deposits empowers individuals to confidently assess incidents of attempted suspicious transactions and know how/where to report

14 Using a Risk Based Approach What does this really mean? The systems for classifying and managing risks must be tailored to the specific features of the entity, such as its structure, size, organization, resources, work force and risk factors. No particular methodology or system is imposed. Authorized entities must determine their own risk levels and manage their risks effectively using appropriate procedures and in keeping with their individual characteristics. -AMF guidelines clarifying certain provisions of the General Regulation regarding the prevention of money laundering and terrorist financing, March 15, 2010 Factors to help determine the risk of your business include: Jurisdictions firm operates in and its registrations Canada vs. Intl. and solely PM vs. PM/EMD The types of clients the firm deals with Institutional vs. Private Client The products the firm distributes Hedge/Private Pools vs. Mutual Funds Whether the firm handles cash and securities/own banking facilities Custody of assets 3 rd party custodian vs. own custody

15 Stonegate s Risk Assessment Using FINTRAC s Risk Assessment Matrix along with a review of Stonegate s business Registration Portfolio Manager & EMD Low for managed accounts, moderate for non-managed Jurisdictions All provinces Low Clients Mostly Private Clients Moderate Products/Services Banking Sub-advised mutual funds and segregated model portfolios No banking/don t accept cash/cheques Low Low Custody Arm s length trustee Low Method of soliciting business Referral no marketing Low Client contact Primarily face to face Low

16 AML First Line of Defense The first line of defence in identifying the potential for criminal activity through the firm is at the time of account opening: High risk factors include, non face-to-face account opening, i.e. referral from a dealer complex account types with same settlor and beneficiaries, offshore trusts, multiple holdco s for same or related beneficial holders clients who contact you from outside the province/country to open an account Your NAAF should be detailed and comprehensive to elicit all the information you need to identify the client, KYC and regulatory information at the onset

17 Stonegate s NAAF A detailed, comprehensive NAAF required for each new client relationship ensures proper identity requirements are met

18 Areas of Training Relationship Managers/Advisors Mid-Office Personnel & Admin Acceptable methods and approved documentation for identifying new clients 3 rd Party payment determination requirements Approved countries/jurisdictions the firm does business in Case studies for identifying attempted suspicious transactions Escalation protocol and how to report attempted suspicious transactions Acceptable identity documentation by account type and internal controls for deficient accounts Monitoring for 3 rd party payments and PEFP accounts monitoring for frequent transactions and exception reporting How to file attempted suspicious transaction reports and escalation protocol

19 Training Policy Considerations & Best Practices AML Training required by all staff within 60 days of hire Certificate of successful completion retained in employee file and noted in AML training report maintained by Compliance Review AML training module annually and at the time policies and procedures are added/updated Face to face lunch and learns with real life examples should augment online training for effectiveness Provide CE credits for training completion and on-going participation Test the effectiveness of AML internal controls, by assessing the number of deficient account opening packages, random review of client transactions using exception reports, etc. and adjust training accordingly

20 PMAC Presentation May

21 What Is It? An online system of mainly 1-hour/1-credit compliance courses, including AML, Privacy, etc. Bilingual (English/French) Available from anywhere, 24/7, using any browser Allows anyone to take courses and to get required credits Lets administrators monitor, manage and audit, when needed

22 We believe Our Vision Well designed learning helps individuals acquire necessary knowledge and skills Quality learning helps create abled working environments Ultimately, these abled working environments drive organisational ROI It s about acquiring and applying knowledge, not just taking courses.

23 Who s Involved? Content Expertise - People from the field who focus in on core issues, provide casestudies and upto-date examples, etc. Technical Expertise - Instructional Designers - Multimedia - Programmers - Etc.

24 Courses Are Selectively Accredited By:

25 If There is Interest 1) PMAC.pensivocompliance.com? - Could create a PMAC instance of the college 2) us so we set you up now - Get 20% discount if buying 10 credits or more (credits don t expire) - Include the name and of the administrator

26 The Dashboard Because CO s want and need to know. Monitor: Who s done what course when, including required training such as AML and Privacy Manage: Facilitate targeted communication with any and all employees to address compliance requirements Quickly answer requirements when regulations change Audit: Solid, verifiable and archived evidence to prove compliance at the touch of a button

27 The Dashboard Choose the report you want, when you want it.

28 The Dashboard Add, edit or delete users.

29 The Dashboard Get a snapshot of who s done what (by course). Download in Excel format, if needed.

30 The Dashboard Get the details for each user.

31 Seeing is Believing Walkthrough of various screenshots (offline) Look for: Simple, intuitive design Plain language for everyone to understand Combination of various multimedia to reinforce the learning (and make it engaging!) Very visual to keep people s attention Lots of interaction for active learning Engaging, Impactful, Meaningful Drives Results

32 Audio-on-demand. Makes it more interesting.

33 Great graphics to make the learning impactful.

34 Interactive activities to engage you in the learning.

35 Learn at your own pace, on your own time.

36 Knowledge Checks so you know what you ve learned.

37 Questions and answers that apply to you.

38 Up-to-date Canadian content.

39 AML 4 The case of TVC Real-life case-studies.

40 Info that is critical to your business.

41 Recaps to confirm you ve got it!

42 A brief quiz to make it all come together.

43 A certificate you can print or keep in your online folder.

44 Some of our Courses 4 AML courses (1 on regulations; 3 with recaps and case-studies) 2 Privacy courses (1 on regulations and 1 with a recap and case-studies) 2 Broker-Client Conflicts of Interest (with examples) Etc. Course subjects are determined by our clients

45 If There is Interest 1) PMAC.pensivocompliance.com? - Could create a PMAC instance of the college ) us so we set you up now - Get 20% discount if buying 10 credits or more (credits don t expire) - Include the name and of the administrator

46 Daniel Larocque Toronto: North America: