Increasing expectations of money laundering reporting officers and compliance … · 2020-07-13 · increasing expectations of money laundering reporting officers and compliance officers

INCREASING EXPECTATIONS OF MONEY LAUNDERING REPORTING OFFICERS AND COMPLIANCE OFFICERSCHERYL E. BAZARD

PRESIDENT, BAHAMAS ASSOCIATION OF COMPLIANCE OFFICERS

PRINCIPAL, BAZARD & CO.

CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER, 2018 1

EVOLUTION OF CRIME

• Ponzi schemes

• Money Laundering

• Terrorist Financing

• Cyber Attacks

• Since 2011, the top British banks have paid 61% of their profits in penalties

and restitution.


COMPLIANCE RISK

• THE RISK OF LEGAL OR REGULATORY SANCTIONS, FINANCIAL LOSS OR

LOSS TO REPUTATION THAT A BANK MAY SUFFER AS A RESULT OF ITS

FAILURE TO COMPLY WITH ALL APPLICABLE LAWS, REGULATIONS, CODES

OF CONDUCT AND STANDARDS OF GOOD PRACTICE.

• Basel Committee on Banking Supervision – Compliance and the compliance function in banks

(April, 2005 – Bank for International Settlements)


RESPONSIBILITIES OF COMPLIANCE OFFICER

• Ensure that the financial institution fully complies with the statute laws and regulations

of the Bahamas, guidelines and best practices;

• Establish a written compliance policy that contains the basic principles to be followed

by management and staff

• Establish and communicate a compliance policy

• Ensure that the compliance policy is observed

• Ensure that appropriate remedial or disciplinary action is taken if breaches occur


RESPONSIBILITIES OF COMPLIANCE OFFICER

• Identify and assess compliance risk issues facing its organization

• Educate staff on compliance issues and act as a contact point within the bank

for compliance queries from staff members

• IN ESSENCE – ENSURE THAT A COMPANY IS CONDUCTING ITS BUSINESS IN

FULL COMPLIANCE WITH ALL NATIONAL AND INTERNATIONAL LAWS AND

REGULATIONS AS WELL AS PROFESSIONAL STANDARDS, ACCEPTED

BUSINESS PRACTICES AND INTERNAL STANDARDS – Robert Walters


RESPONSIBLITIES OF COMPLIANCE OFFICERS

• Letter of the Law/Spirit of the Law

• Rules based approach/principles based approach

• Head Office approach v. country suitability approach


ISSUES

• If the CO chooses principles based approach (Could do v. should do):-

• Supervisory predictability

• Consistency

• Use of hindsight

• How does one spread the compliance culture in light of personal liability of COs

• If compliance is everybody’s business, is compliance a support function that removes

scaffolding once the job is done?


ISSUES

• The need to satisfy multiple demands from different stakeholders

(private register bill???)

• ETHICS OF OBEDIENCE V. ETHICS OF CARE AND OF REASON –

Martin Wheatley, Chief Executive of the Financial Conduct

Authority (FCA) in the UK

• Dilemma – Tick the box to produce audit trail


COMPETING STAKEHOLDERS

• The Board Law Enforcement Agencies

• Risk Committee Regulators

• Compliance Committee Competent

Authority

• Audit Committee

• CEO

• Front Line

• Operations

• Internal Audit


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3 LINES OF DEFENCE

• Operational Management – The Business

• Risk Management and Compliance Monitoring – Control Functions

• Assurance – Internal Audit


HOW COMPLIANCE OFFICERS ARE VIEWED

• Advisor

• Monitor

• Manager of regulatory relationships

• Partner with the business

• Big Brother

• Combination of partner and big brother – Truly independent?


MONEY LAUNDERING REPORTING OFFICERS

• As per the Central Bank of the Bahamas Guidelines for Assessing the Fitness

and Propriety of MLROs in The Bahamas

1. Sufficient level of authority and independence

2. Sound understanding of the laws evidenced by a relevant professional

qualification

3. Meet the test of fitness and propriety as determined by the regulator


MONEY LAUNDERING REPORTING OFFICERS

• Registered with the FIU

• Report Suspicious Transaction Reports to the Focal Point Officer

• Note the change of disclosures into 2 classes: - protected and authorized

• Note the changes in the definition of Money Laundering by the FTRA, 2018


PROOF OF MONEY LAUNDERING

• S.8 – For the purpose of this part

• (a) No conviction for an offence shall be necessary to prove that the property

is directly or indirectly the proceeds of crime, nor shall it be necessary to

prove that a specific offence has been committed by any person;

• (b) knowledge, suspicion, intent or purpose may be inferred from objective

factual circumstances (Vienna and Palermo Conventions)


ARRANGEMENTS CONCERNING PROCEEDS OF CRIME

• S. 10 – A person commits an offence of Money Laundering if he knows,

suspects or ought to reasonably have known or suspected that he has entered,

or is entering into an arrangement which facilitates, by whatever means, the

acquisition, retention, use, concealment or the control of proceeds of crime by

or on behalf of another person.”


THE OFFENCE OF MONEY LAUNDERING

• Section 11(1) A person who knows or suspects or ought to reasonably have

known or suspected that he –

• (a) Acquired or is acquiring the proceeds of crime;

• (b) used or is using the proceeds of crime; or

• (c) possessed or possesses the proceeds of crime,

Commits an offence of money laundering


THE OFFENCE OF MONEY LAUNDERING

• 11(2) For the purposes of this section –

• (a) a person acquires property for inadequate consideration if the value of the

consideration is significantly less than the value of the property;

• (b) a person uses or has possession of property for inadequate consideration if the

value of the consideration is significantly less that the value of the use of possession;

• (c) the provision by a person of goods or services which he knows or suspects may

held another to carry out criminal conduct is not consideration.


OBLIGATIONS OF THE INDUSTRY/COMPLIANCE OFFICERS/MLROS

• Protecting

• Preventing

• Client Due Diligence – Quality

• Reporting – Quality

• Reporting – Timing

• Reporting – Failure to Report


WHAT DID WE GET?

• More requirements More requests

• More Expectations NEED I SAY………….

• More Work

• More documentation

• More screening

• More analysis


THOMSON REUTERS’ REPORT – BREAKDOWN OF WORK WEEK

• 16% - tracking regulatory developments

• 14% - reporting to the board and amending policies and procedures

• 54% - interacting with regulators, regulatory inspections and exams,

regulatory reporting, project management of regulatory implementation,

compliance monitoring and training

• 16% - Liaise with control functions


WHAT WE MEANT BY MORE


• Additional resources

• Access to train the trainer courses

• More industry updates

• More consultation

• Personal liability insurance coverage

ROLE OF THE FIU

• Collect

• Register

• Process

• Analyze

• Feed back

• Produce Annual Reports

ISSUES:-

• Turnover at FIUs

• Timing of Analysis

• Conduct investigations into developments in the field of ML and TF

• Us v. Them

• Small communities

• Officers charged with bringing prosecutions:-

• Do they understand the business?

• What is being charged with fraud and theft cases?

SUGGESTIONS

• Quarterly meetings

• Findings vs. statistics

THANK YOU

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Increasing expectations of money laundering reporting officers and compliance … · 2020-07-13 · increasing expectations of money laundering reporting officers and compliance officers