The Board of Directors’ Duty of Oversight: Are

We Doing Enough?

Dato’ Dr Nik Norzrul Thani

AGENDA

• Reporting Structure

• Defined Roles of the Board

• Review Areas

• Initiatives

• Challenges

• Al Rajhi Bank Malaysia Shariah Committee’s

View

REPORTING STRUCTURE

BoardBoard

Risk Risk Management Management

Committee Committee

Head of Compliance Head of Compliance

AML/CFT Officer

AML/CFT Coordinators

Legal & Compliance Legal & Compliance

Department Department

Representatives from Representatives from

all Departments and all Departments and

Branches Branches

Quarterly

Compliance

Report

RMC Report

Reporting to the Compliance

Department to verify AML/CFT

compliance prepared by

AML/CFT Coordinators

Bimonthly reporting to RMC on

AML/CFT Matters prepared by the

Compliance Department

Suspicious

Transactions

Report

Reporting to the Compliance

Department on any suspicious

transactions for the Bank’s

reporting to BNM

Non Compliance

Report

Reporting to the Compliance

Department on any Non

Compliance on AML/CFT Matters

REPORTING STRUCTURE (cont’)

DEFINED ROLES OF THE BOARD IN THE AML

POLICY

• Maintain adequate oversight

• Ensure effective internal controls

• Establish & sign off on policies and procedures

• Review steps are taken to rectify any inadequacies

AML/CFT

Measures

• Define lines of authority and responsibilities

• Ensure separation of duties

• Ensure AML/CFT Officer is appointed

Reporting

Structure

Training • Ensure staff receive adequate training

• Ensure sufficient awareness on staff AML/CFT

obligations

REVIEW AREAS BY RMC

Update on Update on Number of Number of Customers Customers

from High Risk from High Risk Jurisdictions* Jurisdictions*

Number of Suspicious

Transactions

Reports submitted

Number of Suspicious

Transactions

Reports submitted

• Bi-Monthly Review • Ad Hoc Review

Breakdown of Breakdown of High Risk High Risk

Jurisdiction Jurisdiction Customers by Customers by

Branches Branches

Number of Number of freezing freezing

order order received received

Number of Number of freezing freezing

order order received received

AML System AML System Enhancement Enhancement

Update Update

Amendments Amendments made to AML/CFT made to AML/CFT structure and/or structure and/or

policies policies

Audit reports Audit reports or findings or findings

Annual Annual Plan Plan

Update Update

For Illustrative Purposes Only

REVIEW AREAS BY RMC - Samples

AML/CFT INITIATIVES

Redefine High Redefine High Risk Criteria Risk Criteria

Refinements Refinements to Customer to Customer Acceptance Acceptance

Policy Policy

AML/CFT Briefing to AML/CFT Briefing to Branches Branches

AML System AML System Enhancement Enhancement

AML/CFT AML/CFT Awareness Awareness

Week Week

Refinements of Refinements of Customers Customers

Profiling Profiling

Scheduled & Ad Scheduled & Ad Hoc AML/CFT Hoc AML/CFT

Review Review

Development of Development of Demerit System for Demerit System for

Breaches found Breaches found

Initiatives

CHALLENGES

Technology

• Limitation in centralisation of system that can adapt to unique needs of each line of business

• Costly. Systems often have to be developed in-house

Training

• Training courses on relevant AML trends and practices are limited and costly

People

• Scarce resource and skill set availability to monitor suspicious transactions

• Resistance from business that tend to focus on sales targets and consider AML/CFT procedures as a hassle

• Difficulty in defining ownership for cross products customers

• AML/CFT and general compliance efforts not made priority, often interpreted as non-profit making and costly

ARBM SHARIAH COMMITTEE’S VIEW

Investigation

Order

Treatment of Funds under Investigation Order, Freezing of Accounts and Seizure of Funds

• The Bank may continue to invest the deposits and gain profit from the investment based on the legal maxim, “A person is presumed innocent until proven guilty” for all

types of accounts.

• The Bank may continue to invest deposits under Qard account

• The Bank must cease to invest deposits under other types of accounts such as Mudharabah fixed investment

Order to

Freeze

Accounts

• The Bank must cease to invest the deposits under Qard from

the effective date of notice. All modes of investment for all types of accounts are forbidden

Notice to

Seize

Funds

THANK YOU