Caribbean Indigenous Banks
Anti-Money Laundering Survey
An analysis of the local challenges
Patricia Hamilton
CEO Caribbean Association of Indigenous Banks Inc.
An Integrated Approach
Compliance Requirements
International, Regulatory, Industry, Third Party, Internal
Anti-Money Laundering Strategy
.
Investment suitability
Risk assessment
Security & technology usage
Tax etc.
Investent suitability
Know your customer (KYC) Account Opening
Anti- money laundering standards and procedures
Administrative and end-user
policies and procedures
KYC - Data
Access/Mining
Transaction Monitoring/
Tracking Processes
AML Reporting
Training and Awareness Program
Management Commitment
Business and organisation
Processes & Initiatives
Tactical short term
solutions
2
Cost of Compliance
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
2
Challenges
Management
Oversight and
Guidance
Training
Managing CrossFunctional
Expectations (Business
vs. Compliance)
IT Systems
Accountability for
Non-Compliance
Adequately Skilled and
Sufficient Officers and
Staff that understand
local requirements
Operational
Improvements
34th Annual General Meeting & Conference, 2007
Enterprise-wide
standards
Patricia Hamilton, CEO CAIB Inc.
3
Challenges: Management Support
Management
Oversight and
Guidance
Training
Managing CrossFunctional
Expectations (Business
vs. Compliance)
IT Systems
Accountability for
Non-Compliance
Adequately Skilled and
Sufficient Officers and
Staff that understand
local requirements
Operational
Improvements
34th Annual General Meeting & Conference, 2007
Enterprise-wide
standards
Patricia Hamilton, CEO CAIB Inc.
4
Management Support
AML is a key value; a function of the integrity of the
company and as such must be promoted by directors
and management.
Key values are supported by management behavior:
- Visible attention and appreciation
- Agenda item in board meetings
- Element of staff assessments
- Available budgets for IT, training etc.
- Status & powers of the AML officer
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
5
The “tone on top”
Most consider management to be supportive.
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
6
Challenges: Business vs. Compliance
Management
Oversight and
Guidance
Training
Managing CrossFunctional
Expectations (Business
vs. Compliance)
IT Systems
Accountability for
Non-Compliance
Adequately Skilled and
Sufficient Officers and
Staff that understand
local requirements
Operational
Improvements
34th Annual General Meeting & Conference, 2007
Enterprise-wide
standards
Patricia Hamilton, CEO CAIB Inc.
7
Centralized vs. Decentralized
Compliance Function
Centralized
Decentralized
Advantages
•
•
•
Advantages
Limits differing interpretations
Limits data entry error
Quality Control is easier
4/9/2015
Skill set applied to entry
Disadvantages
•
•
Disadvantages
•
•
•
Quality Control
Enforcement
Skills required of staff
Backlog
Patricia Hamilton
8
Management of AML efforts should come
from throughout the organization
• Establish a “culture of compliance”
– Set tone at the top
• Top management is ultimately responsible for
compliance
– Business is responsible for day-to-day
compliance
– Compliance management plays a key role in
corporate governance, monitoring and advisory
functions
4/9/2015
Patricia Hamilton
9
Centralized vs. Decentralized
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
10
Challenges: Technology
Management
Oversight and
Guidance
Training
Managing CrossFunctional
Expectations (Business
vs. Compliance)
IT Systems
Accountability for
Non-Compliance
Adequately Skilled and
Sufficient Officers and
Staff that understand
local requirements
Operational
Improvements
34th Annual General Meeting & Conference, 2007
Enterprise-wide
standards
Patricia Hamilton, CEO CAIB Inc.
11
Technology as a compliance enabler
Manual
Rules
Refinement
Workflow
Where most
Caribbean
banks are
The above maturity model depicts how Compliance
systems can evolve
4/9/2015
Patricia Hamilton
Customer
Profiling
Enterprise
Profiling
Integrated
Organization
Advanced
Monitoring
12
Support systems
Just above half report adequate manual & technological support.
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
13
Use of Technology for AML
77% have either invested
or have plans to invest in
the future.
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
14
Capabilities of Transaction Monitoring
Software
A= Client Profiling
B= Transaction Profiling
C= Historic Client Behaviour
D= Pattern Recognition of Transactions
E= Peer Grouping
F= All of the Above
Most respondents report that their transaction monitoring system has all 5
features.
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
15
Reviewing Transaction Monitoring
software for gaps
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
16
Impact of Software
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
17
Challenges: Training
Management
Oversight and
Guidance
Training
Managing CrossFunctional
Expectations (Business
vs. Compliance)
IT Systems
Accountability for
Non-Compliance
Adequately Skilled and
Sufficient Officers and
Staff that understand
local requirements
Operational
Improvements
34th Annual General Meeting & Conference, 2007
Enterprise-wide
standards
Patricia Hamilton, CEO CAIB Inc.
18
Training: Critical components
Policies and
values of the
company
Management
discussion
Communication
skills (KYC)
34th Annual General Meeting & Conference, 2007
Laws and
Regulations
Laundering
Strategies
Patricia Hamilton, CEO CAIB Inc.
19
Caribbean Financial Action Task Force
4/9/2015
Patricia Hamilton
20
Challenges: Accountability
Management
Oversight and
Guidance
Training
Managing CrossFunctional
Expectations (Business
vs. Compliance)
IT Systems
Accountability for
Non-Compliance
Adequately Skilled and
Sufficient Officers and
Staff that understand
local requirements
Operational
Improvements
34th Annual General Meeting & Conference, 2007
Enterprise-wide
standards
Patricia Hamilton, CEO CAIB Inc.
21
Accountability- A necessity
• The key challenge for many financial
institutions is to sustain the effectiveness of
their AML programs on an ongoing basis.
• An AML Accountability Review addresses
issues related to corporate risk management
and the legal liability of corporate directors,
officers, supervisors and staff in managing the
reporting cycle for suspicious transactions.
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
22
Regulatory Bodies Governing
Countries
Regulatory Bodies
Barbados
Financial Intelligence Unit
Cayman Islands
Financial Intelligence Unit
Cayman Islands Monetary Authority
Financial Crimes Unit
Portfolio of Legal Affairs
Cayman Islands Stock Exchange
Jamaica
Financial Investigations Division (Ministry of Finance &
Planning)
Trinidad & Tobago
Financial Investigation Unit
Eastern Caribbean states
Eastern Caribbean Central Bank
National Anti-Money Laundering Committee
Office of National Drug & Money Laundering Control
Policy
Guyana
Finance Intelligence Unit
Suriname
Meldpunt ongebruikelijke
Patricia Hamilton, CEO CAIB Inc.
34th Annual General Meeting & Conference, 2007
23
Familiarity with consequences for
breaches
Most staff are considered to be familiar with consequences for breaches.
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
24
Challenges: Human Resources
Management
Oversight and
Guidance
Training
Managing CrossFunctional
Expectations (Business
vs. Compliance)
IT Systems
Accountability for
Non-Compliance
Adequately Skilled and
Sufficient Officers and
Staff that understand
local requirements
Operational
Improvements
34th Annual General Meeting & Conference, 2007
Enterprise-wide
standards
Patricia Hamilton, CEO CAIB Inc.
25
How do we rank?
Experience in other jurisdictions shows that a
common problem is a lack of skilled and
experienced staff with anti-money laundering
expertise.
How do we rank?
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
26
Numbers of staff dedicated to AML
Most banks employ 1-5 staff whose primary duty is AML. The majority of these are
responsible for Transaction Monitoring.
4/9/2015
Patricia Hamilton
27
The skill-set of staff
Although in small numbers, staff are considered to be adequately skilled in AML & CFT.
4/9/2015
Patricia Hamilton
28
Challenges: Operations
Management
Oversight and
Guidance
Training
Managing CrossFunctional
Expectations (Business
vs. Compliance)
IT Systems
Accountability for
Non-Compliance
Adequately Skilled and
Sufficient Officers and
Staff that understand
local requirements
Operational
Improvements
34th Annual General Meeting & Conference, 2007
Enterprise-wide
standards
Patricia Hamilton, CEO CAIB Inc.
29
The ideal operational infrastructure
Threads
Policy &
Procedures
Account /
Transaction
Monitoring
Risk
Profile
Record Keeping
/ Retention
34th Annual General Meeting & Conference, 2007
AML
Regulatory
Requirements
Patricia Hamilton, CEO CAIB Inc.
People
Process
Technology
30
Budgetary Expenditure
33% have spent over US
$100,000 on Transaction
Monitoring.
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
31
Specific Use of Budgetary Funds
A= Increase in staff
B= Enhancements to existing transaction monitoring system
C= Implementation of automated transaction monitoring system
D= Training
E= Conferences
F= Other
Most respondents reported a combination of methods B, D & E.
34th
Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
32
Methods for indentifying suspicious
activity
Least
Used
A= Reliance on employees’ vigilance
B= Review of exception reports
C= Internally developed transaction systems/exception reports
D= Vendor supported automated transaction monitoring system
Most respondents (28%) reported a combination of methods A, B & C while
17% reported using all four methods.
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
33
Policies & Procedures
However, 50% of these
apply only to the
Compliance department.
4/9/2015
Patricia Hamilton
34
To conclude…
Essential Elements of Effective AML
1.
Management support, commitment, accountability, “tone at the top”
2. Effective governance structure to oversight line of business functions
3. Comprehensive and actionable policies and procedures to reflect global
and country specific requirements
4. Appropriate compliance communication, awareness, reporting, and
education plan
5.
Process to identify and implement regulatory requirements timely and
effectively
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
36
Essential Elements of Effective AML,
cont’d.
6.
Monitoring/self-assessment programs to effectively detect violations
and weak control systems
7.
Reporting and communication processes to ensure the status of
significant compliance issues are communicated
8.
Tracking process for corrective actions required due to results from
monitoring programs, complaints, Internal Audit, and regulatory reports
9.
Effective training programs
10. Involvement of compliance function in the development of new products
and services
34th Annual General Meeting & Conference, 2007
Patricia Hamilton, CEO CAIB Inc.
37
Questions?
Caribbean Indigenous Banks
Anti-Money Laundering Survey
An analysis of the local challenges
Patricia Hamilton
CEO Caribbean Association of Indigenous Banks Inc.