ANTI-MONEY LAUNDERING
BEST PRACTICES
Passing an AML Audit
12th Annual ACCP Compliance Forum
May 6th 2013
© 2013 CHRISMATHERS INC.
AML BEST PRACTICES
It is the duty of a compliance officer to
comfort the afflicted…
… and to afflict the
comfortable.
AML BEST PRACTICES
Could you pass an AML audit or field examination?
•
Evolution of AML regulations.
•
What does “passing” mean?
•
What are the regulators looking for?
•
Where is the “low hanging fruit” in a field examination?
•
What are the consequences of “failure”?
AML BEST PRACTICES
Summary of Significant Developments To Canadian Anti-Money Laundering Regulations
2000
2008 -2010
•
Proceeds of Crime (Money Laundering) Act
comes into force.
•
Act requires mandatory reporting of
suspicious, and certain other, financial
transactions.
•
FINTRAC established to analyze these reports
and to release information to intelligence and
law enforcement agencies.
2001
•
Following 9/11, legislation changed to include
countering the financing of terrorism and
renamed PCMLTFA.
Multiple substantive changes involving:
• Reporting
• Record Keeping
• Ascertaining Identity
• Politically Exposed Foreign Persons
• Third Party Determination
• Compliance Regime
2011
•
Tax evasion and copyright infringement added
to “designated offences” for suspicious
transaction reporting
2013 - 2014
•
Changes to the definition of business
relationship, requirement to assess risk on an
ongoing basis and to document results of
assessment.
AML BEST PRACTICES
COMPLIANCE REGIME
The following (summarized) 5 elements must be
included in an anti-money laundering compliance
regime:
• Appointment of a compliance officer responsible
for AML.
• Written compliance policies and procedures.
• Assessment and documentation of risks &
measures to mitigate high risks.
• Ongoing,
program.
written
AML
compliance
training
• Independent review of AML compliance regime at
least every 2 years.
AML BEST PRACTICES
What does “passing” mean?
• No jail time.
• No AMP’s.
• No “weaknesses” or “deficiencies”.
AML BEST PRACTICES
What are the regulators looking for?
From you …
•
•
•
•
•
•
Full compliance
Documented risk assessment
Documented risk mitigating procedures
Timely filing (STRs, SATRs, LCTs, EFTs)
Training
Proper record keeping
AML BEST PRACTICES
What percentage of entities had no AML compliance
regime?
a.
b.
c.
d.
7%
12%
20%
50%
AML BEST PRACTICES
WHY?
Failure to:
•
•
•
•
•
•
•
•
provide documents / cooperate.
develop written compliance policy & procedures.
assess and document risk.
develop a written training program.
keep information up to date.
report EFTs, LCTs, etc.
report on a timely basis.
keep prescribed records.
AML BEST PRACTICES
What are the regulators looking for?
K
W
About you …
•
•
•
•
•
Your business sector.
Your business location.
Your customers.
Your affiliations.
Trends.
AML BEST PRACTICES
Top destination or originating jurisdictions of electronic funds transfers
related to suspected money laundering cases involving: **
Drug offences
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
USA
India
Vietnam
Hong Kong
China
Taiwan
Iran
United Kingdom
Belarus
Latvia
Fraud offences (except securities fraud)
11.
12.
13.
14.
15.
Switzerland
Mexico
Peru
Israel
Thailand
** Source: FINTRAC Typologies and Trends Reports – April 2012
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
USA
United Kingdom
Iran
Japan
Hong Kong
Israel
Switzerland
China
Germany
Italy
11.
12.
13.
14.
15.
Austria
France
Cyprus
Guernsey
India
AML BEST PRACTICES
Top destination or originating jurisdictions of electronic funds transfers
related to suspected money laundering cases involving: **
Securities fraud offences
Suspected terrorist financing cases
1. USA
2. Netherlands
Antilles
3. United Kingdom
4. China
5. Mexico
6. Bahamas
7. Antigua and
Barbuda
8. Netherlands
9. Bermuda
1. USA
2. United Arab
Emirates
3. Lebanon
4. Pakistan
5. United Kingdom
6. India
7. Austria
8. Netherlands
9. Iran
10. Hong Kong
10. Hong Kong
11. Panama
12. Dominican
Republic
13. Turks and Caicos
14. Barbados
15. Luxembourg
** Source: FINTRAC Typologies and Trends Reports – April 2012
11.
12.
13.
14.
15.
Sri Lanka
Saudi Arabia
Switzerland
Hungary
Turkey
AML BEST PRACTICES
Low Hanging Fruit - Field Examination
Issues
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•
•
•
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•
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•
•
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Documented risk assessment
3rd Party Determination
Beneficial Ownership
PEFP determination, “look back”
Failure to file STR’s
ID - Expired / Photocopies / Non FTF issues
Record Keeping (numerous issues)
Entities – no confirmation of existence
Charities - improper procedures
Use of Agents
Individual’s business or occupation
AML BEST PRACTICES
The Consequences of “Failure”
• Naming and shaming.
• You’re “on the list”.
• Loss of business.
• Reputation of Compliance Officer
• A monetary penalty.
AML BEST PRACTICES
FINTRAC considers 3 criteria in
determining the penalty amount:
• the harm caused by the violation(s);
• the compliance history of the reporting
entity (5 years); and
• the non-punitive nature of an
administrative penalty.
AML BEST PRACTICES
Violations classified as:
• Minor (individual / entity)
• AMP $1 to $1,000
Recent asset
procurement by
regulators???
• Serious (individual / entity)
• AMP $1 to $100,000
• Very Serious (individual)
• AMP $1 to $100,000
• Very Serious (entity)
• AMP $1 to $500,000
AML BEST PRACTICES
The PCMLTFA:
• Catching criminals or compliance officers?
• $5B to $15B laundered in Canada annually.
QUESTIONS???
(416) 860-8081
rduschek@chrismathers.com