Slide 1 of 17 Proprietary ...Failure to report a suspicious transaction could lead to substantial...

1

Proprietaryhttp://www.ARRAYdev.com/FINTRAC

AML Accountability Review © ARRAY Development, 2004

Slide 1 of 17

Anti-Money Laundering Accountability ReviewAnti-Money Laundering Accountability Review

Financialentities

Regulatoryauthorities

Independentauditors



Slide 2 of 17

FINTRAC Compliance and Reporting RequirementsFINTRAC Compliance and Reporting Requirements

? Proceeds of Crime (Money Laundering) andTerrorist Financing Act? Legislates detection and deterrence of money

laundering? All Canadian deposit-taking institutions are subject to

the Act, Regulations and Guidelines? Defined required suspicious transactions reporting

? Requires:? Immediately report to FINTRAC all suspicious

transactions? Periodically report and keep the prescribed records

2



Slide 3 of 17

FINTRAC Enforcement

? Failure to implement a compliance regime:? Conviction up to 5 years + $500,000 fine

? Failure to report a suspicious transaction couldlead to substantial fines and legal actions? Conviction up to 5 years + $2,000,000 fine? No minimum threshold for reporting

? Required maintain effective record-keepingsystem (penalty: up to 5 years imprisonment and$500,000)

? FINTRAC and external auditors should haveaccess to all the records in a timely fashion



Slide 4 of 17

FINTRAC Enforcement (con’s)

? Employees who reported to their superior areexempted from being charged under the Act!!!? The ultimate executive responsibility? Need to document to discharge responsibility,

archiving is crucial? For electronic records, an electronic signature of the

signing individual “must be retained”

? A special Individual Responsible forimplementing FINTRAC Compliance must beappointed

3



Slide 5 of 17

Periodic Reviews

? The Act compels all industry participants to:? Implement a comprehensive compliance regime? Maintain necessary rigor

? FINTRAC Guideline 4? Prescribes periodic reviews? To ensure the effectiveness of compliance policies

and procedures

? The key challenge for many financial institutions? To sustain their effectiveness? on an ongoing basis



Slide 6 of 17

Required Accountability Review

? Interviews with those handling transactions and theirsupervisors

? Review of criteria and process for identification andreporting

? Sampling of large cash transactions/reporting? Sampling of international funds transfers/report? Validity and Reasonableness test for exceptions? Compliance test for record-keeping system? Compliance test for client identification process

4



Slide 7 of 17

Factors/Indicators – Issues to Watch For!

? Unclear internal or third party (i.e., agent)accountabilities

? Lack of necessary documentation or transparency? Missed impact assessment for changes in legislation/

FINTRAC guidelines? Lack of formal training mechanisms or incomplete/

obsolete training content? Introduction of new products or services without AML

consideration and necessary policy adjustments? Presence of compliance related issues and/or lack of

senior management or employee understanding



Slide 8 of 17

Interviews with the Payment Handling Populationand their Supervisors

? Interview representative senior officers regarding AMLprogram

? Interview compliance officer and related personnel to:? Evaluate understanding of AML regulations? Review internal policies? Acquire and assess reporting records? Walk through AML policies, processes and practices

? Collect volume and operational data? Model and compare actual results against expectations:

? The current environment? Business volumes? Expected results

5



Slide 9 of 17

Review of Criteria and Process forIdentification and Reporting

? Assess internal processes for identifying and reportingsuspicious transactions in various operating units aswell as central authority – compare to expectation

? Identify payments handling population, includingemployees, agents and others who act on behalf of theorganization – i.e., opportunity areas

? Identify, observe and validate criteria used to identifysuspicious transactions – representing a majority of thepotential opportunity areas

? Review periodic feedback on compliance regime andrecords provided by FINTRAC, if any



Slide 10 of 17

Review AML training and developmentprogram, and delivery methods

? Ensure appropriate background of AML andcontent, such as:? Understanding of AML background, risks, required

reporting, client identification, record-keepingrequirements and penalties for non-compliance

? Internal policies and identification of individualresponsibilities for AML

? Examples of vulnerability, criminal activities,reporting responsibilities and an understanding ofthe appropriate steps to address suspicious activity

6



Slide 11 of 17

Sampling of Large Cash Transactionsand their Reporting

? Assess a sample of large cash transactions? Review documented reporting and other

transaction records? Observe a sampling of suspicious transaction

process and outcomes in action by onsite visit



Slide 12 of 17

Viability and Reasonableness Test of ExceptionsIncluding Annual Report

? Review exception reporting and assessexception criteria

? Review annual report to FINTRAC

7



Slide 13 of 17

Compliance Test of Record-Keeping System

? Assess organization’s record-keeping system forcompliance with the legislation

? Review records to ensure appropriate documents arebeing maintained for the appropriate time periods, suchas:

? Transactions (e.g., Large cash transactions, deposit slips, debitand credit memos, cleared cheques drawn on or deposited toan account, Foreign Currency transaction tickets)

? Client Information Records (e.g, Signature cards, Copy ofofficial corporate records (binding provisions), Account Holderinformation, Account Operating Agreements)

? Credit Files (e.g., client files)? Other (e.g., copy of trust deed and settlor’s identification)



Slide 14 of 17

Compliance Test of Client Identification Procedures

? Assess the organization’s client identificationprocedures for compliance with the legislation? Measures to identify individuals or entities? Third Party determination and records

8



Slide 15 of 17

Content of Final Report

? Scope and details of assessment? Findings

? Outline of identified weaknesses in internal policyand procedures

? Employee training and development requirements? Reporting and record keeping requirements? Recommended corrective measures? Required follow-up action

? Additional value added commentary onAnti-Money Laundering operations



Slide 16 of 17

ARRAY Development &Value Improvement Associates

? Excellent track record in helping leadingfinancial institutions and government agenciesto conceptualize, prototype and developintelligent business solutions

? We focus on making your business processesefficient, cost-effective and secure

? For additional information please contact:Gerry Purcellgerry.purcell (at) arraydev.comPhone: 416-865-3395http://www.ARRAYdev.com/fintrac/

9



Slide 17 of 17

Anti-Money Laundering Accountability ReviewAnti-Money Laundering Accountability Review

Financialentities

Regulatoryauthorities

Independentauditors

Slide 1 of 17 Proprietary ...Failure to report a suspicious transaction could lead to substantial...

Documents

Transcript of Slide 1 of 17 Proprietary ...Failure to report a suspicious transaction could lead to substantial...