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Increasing AML Audit Efficiency
A Presentation to the Association of Internal Bank Auditors
March 19, 2009
Shaun CreeganSenior Manager+1 [email protected]
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• Current Financial Environment
• Effects of the Economy on Banking Organizations
• Current AML Regulatory Environment
• Improving the Efficiency and Effectiveness of AML Audits
• Lessons Learned
• Questions & Answers
Agenda
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What the experts say . . .
“…the most wrenching since the end of the second world war.” – Alan Greenspan, Former Reserve Chairman
“There has been nothing like the events of late since the Great Depression.” – George Soros, Well-known Investor
Current Financial Environment
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Current Financial Environment
Sizing the impact of this crisis
Financial Crisis Timeline
$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
Types of Financial Crisis
US
Do
llars
(B
illio
n)
U.S. S&L 1980s/early 1990s
Japanese Banking Crisis of 1990s
Asian Banking Crisis of 1998-1999
U.S. Financial Losses from theCredit Crisis $3.6 trillion 2009(Estimated)
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Banking organizations under extreme pressure to reduce costs
Banking industry undergoing significant change
Banks in almost all countries likely to face regulatory reform as a result of the crisis
Senior management, for most organizations, are focused on “safety and soundness” issues
Effects of the Economy on Banking Organizations
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Effects of the Economy on Banking Organizations
What does this mean for the Bank’s Internal Audit
Department?
• Increased pressure to execute audits more efficiently and effectively
• Increased pressure to find and remediate potential weakness and control breakdowns
• Reduce overall cost and time of audits
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Lloyds TSB Bank - $350 Million Settlement
Nigeria’s United Bank, New York Branch - $15 Million Civil Penalty
Sigue Corp & Sigue LLC of California - $15 Million Civil Penalty
E*Trade - $1 Million Fine
Current AML Regulatory Environment
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Multiple organizations asked that AML and CTF be discussed as part of the recent G-20 Submit
New Treasury Secretary, Timothy Geithner, has said he takes global AML and CTR efforts very seriously
“The FATF needs to be overhauled and strengthened so it can use its powers to name and shame more countries and groups that flout international financial crime accords” – Global Witness, U.K. based non-governmental organization
Regulatory scrutiny of AML and OFAC risk management will continue to increase
Current AML Regulatory Environment
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“Criminals and terrorists do not respect the law; they certainly do not respect national borders. They will seek to exploit the weakest link to move and launder money through any means of financial intermediation. Our joint efforts to root out illicit financial activity increase confidencein and promote the integrity and stability of the financial system. These are critical contributions to helping the banking system return to what it does best, i.e. promoting legitimate economic activity and growth.” James H. Freis, JR., Director of FinCEN
Current AML Regulatory Environment
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Improving the Efficiency and Effectiveness of AML Audits
• Properly plan and scope the audit– Identify areas that require substantive testing and
determine appropriate sampling
• Identify and research changes/updates to AML rules and regulations
• Talk with your colleagues – Discuss trends and hot topics in the industry
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• Make sure the AML audit is well organized
• Review the issues and recommendations of the last audit – Validate that all management action plans have been
implemented
• Revisit the AML risk assessment and AML program– Identify low risk areas that may not have to be
covered every year
Improving the Efficiency and Effectiveness of AML Audits
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• Leverage audit professionals
• Set reasonable timeframes
• Develop and maintain open communication with the AML Compliance team
• Look for ways to leverage monitoring done by Compliance/Business
Improving the Efficiency and Effectiveness of AML Audits
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• Incorporate automation and technology into the audit process where possible
• Communicate potential issues timely with the auditee
• Complete workpaper documentation during the course of the audit
• Begin drafting audit report during the course of the audit
Improving the Efficiency and Effectiveness of AML Audits
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Lessons Learned
• Be proactive and assertive
• Stay up to date with AML issues, guidance and training
• Network and ask questions
• Use previous experiences to enhance your approach
• Keep in touch with audit clients
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Questions & Answers
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