Anti-Money Laundering Compliance Program, Exams of Foreign Exchange Law

Download Anti-Money Laundering Compliance Program and more Exams Foreign Exchange Law in PDF only on Docsity! Anti-Money Laundering Compliance Program Why is the risk‐based approach more preferable than a prescriptive approach in the area of anti‐money laundering and counter‐terrorist financing? - - Flexible — as money laundering and terrorist financing risks vary across jurisdictions, customers, products and delivery channels, and over time - Effective — as companies are better equipped than legislators to effectively assess and mitigate the particular money laundering and terrorist financing risks they face - Proportionate — because a risk‐based approach promotes a common sense and intelligent approach to fighting money laundering and terrorist financing as opposed to a "check the box" approach. It also allows firms to minimize the adverse impact of anti‐money laundering procedures on their low‐risk customers. What banking functions or products are considered high‐risk? - - Private banking - Offshore international activity - Deposit‐taking facilities - Wire transfer and cash‐management functions - Transactions in which the primary beneficiary is undisclosed - Loan guarantee schemes - Travelers checks - Official bank checks - Money orders - Foreign exchange transactions - Trade‐financing transactions with unusual pricing features - Payable Through Accounts (PTAs). What are the basic elements of financial institution's anti‐money laundering program? - - A system of internal policies, procedures and controls - A designated compliance officer with day‐to‐day oversight over the AML program - An ongoing employee training program - An independent audit function to test the AML program. What are some characteristics of a successful anti‐money laundering compliance training program? - Regulations and laws require financial institutions to have formal, written AML compliance programs that include "training for appropriate personnel." A successful training program not only should meet the standards set out in the laws and regulations that apply to an institution, but should also satisfy internal policies and procedures and should mitigate the risk of getting caught up in a money laundering scandal. Training is one of the most important ways to stress the importance of anti‐money laundering efforts, as well as educating employees about what to do if they encounter potential money laundering. Identify, in general, who should approve policies and procedures. - Policies and procedures should be in writing, and must be approved by appropriate levels of management. In general, institution‐level policies should be approved by the board, while business unit procedures can be approved by business unit management. Identify the basic elements behind the development of an effective anti‐money laundering compliance training program. - Who to train, What to train on, How to train, When to train, and Where to train Identify the responsibilities of the anti‐money laundering compliance officer. - A person should be designated as the anti‐money laundering compliance officer. This individual should be responsible for designing and implementing the program, making necessary changes and disseminating information about the program's successes and failures to key staff members, constructing anti‐money laundering‐related content for staff training programs and staying current on legal and regulatory developments in the field. What steps should the independent audit take to evaluate the bank's ability to identify unusual activity? - - Reviewing policies, procedures, and processes for suspicious activity monitoring - Evaluating the system's methodology for establishing and analyzing expected activity or filtering criteria - Evaluating the system's ability to generate monitoring reports - Determining whether the system's filtering criteria are reasonable. Describe how the independent audit should review Suspicious Transaction Reporting (STR) systems - The independent audit should review Suspicious Transaction Reporting (STR) systems, which should include an evaluation of the research and referral of unusual transactions. Testing should include a review of policies, procedures and processes for referring unusual or suspicious activity from all business lines (e.g., legal, private banking, foreign correspondent banking) to the personnel or department responsible for evaluating unusual activity. Where does the ultimate responsibility for the AML compliance program rest with? - The ultimate responsibility for the AML compliance program rests with the board of directors. Members must set the tone from the top by openly voicing their commitment to the program, ensuring that their commitment flows through all service areas and lines of business, and holding responsible parties accountable for compliance. Are the costs of non‐compliance with anti‐money laundering laws and regulations limited to fines and penalties levied by regulators? - The cost of the fines and penalties levied by regulators due to non‐compliance with anti‐money laundering laws and regulations is only part of the overall expense. Significant additional costs include legal bills, potential loss of business due to reputational damage, extensive compliance review charges, consulting fees, costs for system and other compliance program enhancements, as well as the opportunity costs as the compliance staff and others will be spending the bulk of their time addressing the consent order.