Agenda. Time Topic Speaker 09:00 09:05 09:05 10:00 10:00 10:40 10:40 10:50 10:50 12:00. Roy Melnick - ACAMS

Transcription

1 2013

2 Agenda Time Topic Speaker 09:00 09:05 09:05 10:00 10:00 10:40 10:40 10:50 10:50 12:00 Introduction Introduction about ACAMS Money Laundering trends Feedback from onsite reviews Tea Compliance and Enforcement & Scope of Item 12 of Schedule 1 Risk-based supervision Charene Nortier Roy Melnick - ACAMS Charene Nortier - FSB Philip Langenhoven and Charl Geel FIC

3 ACAMS South Africa Chapter 3

4 About ACAMS The Association of Certified Anti-Money Laundering Specialists is the premier global organization for AML/CTF and financial crime detection and prevention professionals. Network Membership of 10,000 AML professionals in 140 countries. Local chapters in 14 geographies Task forces to help guide the programming and focus of ACAMS

5 ACAMS achieves its mission by: About ACAMS Promoting international standards for the detection and prevention of money laundering and terrorist financing Educating professionals in private sector and government organizations about these standards and the strategies and practices required to meet them Certifying the achievements of its members ACAMS provides A global network of industry professionals with which you can share knowledge and experience Tools and techniques to fight money laundering, terrorist financing and financial crime more effectively Practical solutions to everyday challenges that can be implemented immediately

6 ACAMS Benefits Enhanced networking opportunities Access to a wealth of practical education, information sharing and training Global recognition and career advancement Full access to acams.org Exclusive news resources, including ACAMS Today, acamstoday.org and ACAMS Connection Complimentary Live Chats and webinars Preferential pricing on all ACAMS offerings, including CAMS certification Chapter membership

7 CAMS certification

8 Why CAMS is important Preparing for the CAMS examination strengthens your current knowledge and widens your expertise, enabling you to better protect your organization. The decision to pursue the credential is proof of your commitment to the profession. It keeps you on top of new developments in the field and shows regulators and examiners that you and your employer are serious about combating money laundering.

9 CAMS and your career The CAMS certification examination rigorously tests for aptitude and expertise in anti-money laundering detection and enforcement. Each person who passes the examination becomes a Certified Anti-Money Laundering Specialist (CAMS), a designation that identifies him or her as an expert in the field. This credential is recognized by financial institutions and governments throughout the world.

10 CAMS and your organisation The CAMS credential: Demonstrates to examiners that your department has specialized, knowledge in the AML field. CAMS is recognized as the benchmark of AML certifications by regulatory agencies and throughout the financial services industry. Can help your company minimize risk. Having a CAMS-certified team ensures that your people share and maintain a common level of AML knowledge. Studying for the examination also offers guidance in designing and implementing tailored AML programs. Is endorsed by the government. Previous reports by the General Accounting Office supports having federal employees earn the CAMS certification. Upgrades your staff s skills. The exam preparation and continuing education required to maintain certification ensures your employees skills remain sharp and their knowledge current.

11 South African Chapter

12 SA Chapter - Mission and goal Our mission is to support the overall ACAMS mission, advance the knowledge of the South Africa Chapter members, and provide a vehicle through which all Chapter members can network and improve the level of AML/CFT understanding and effectiveness in South Africa. Our goals are to: - Provide a platform for career development and professional networking for AML professionals; and Provide a resource to help accountable institutions and related businesses to identify and locate anti-money laundering specialists This will be achieved by: - Providing up-to-date education and training; Professional networking opportunities; and Career development tools

13 Objectives Bring together, knowledge, skills and experience of AML professionals Promote the development and implementation of local anti-money laundering policies Assist ACAMS in identifying AML educational needs and facilitating exchange of ideas Assisting ACAMS in its program development and membership growth Serve as a formal and informal forum to discuss matters that could serve to improve the scope and quality of service to AML specialists

14 Objectives conti. Provide members with opportunities to obtain assistance from other professions and organisations concerned with AML issues Adopt and disseminate ACAMS mission, goal and objectives Membership will be open to other countries within the Southern Africa region Regional outreach and promotion of the AML profession to SADC countries Promote expertise within the local regulatory standards and Continuous Professional Education

15 South African Chapter 2013 activity

16 Activities during 2013 June - Understanding of the requirements for the application of a risk based approach. Participation by the FIC, SARB and Consulting firm. September - Investigations of money laundering offences. FIC, Asset Forfeiture Unit, Banking & Consulting firms. Attendance and participation at the G8 Public & Private Sector Dialogue in Swakopmund December Board members to participate at 3 rd ACAMS Africa AML & Financial Crime conference to be held in Accra, Ghana during December December Co-Chair involvement as panellist at the GIABA Inter-Universities Speech Contest on AML/ CFT Impact on West African Economies

17 South African Chapter Contact detail

18 International: Main Board contact details Select Communities, Chapters and then South Africa Co-Chairs Roy Melnick or Kevin West or Membership Andre Wentzel or Christopher Malan or

19 PwC AML Services Anti-Money Laundering, Counter Terrorist Financing and Sanctions 2013 Financial Services Board training Roy Melnick

20 Implementing a risk based approach Addressing the threat of money laundering and financing of terrorism requires a comprehensive approach taking into account your people, processes, technology, governance and assurance. Combining this into a framework forms the basis for a robust risk management system. Increasing vigilance is necessary to ensure that risk-based controls are adequate, effective and proportional to your organisational risk. Managing ML/TF risk should be an on-going, strategic business imperative. PwC 20

21 Risk management and the risk based approach 21

22 Risk management Issues and challenges Assessing your organisation s money laundering and terrorist financing vulnerability the risk assessment. Considerations for implementing a risk-based approach to managing ML/TF risk assessing the risk management, people, process, technology, governance requirements Establishing and implementing an effective AML/CFT risk framework the components to be included Applying the traditional risk management components i.e. knowing how to identify, assess, manage and mitigate AML/CFT risks PwC 22

23 The meaning of a risk based approach A risk-based approach establishes criteria against which a life insurance company or intermediary s customers, products, distribution channels, and geographical locations can be assessed with respect to the degree of risk they pose to the organisation. PwC 23

24 Requirements and challenges of implementing a risk based It requires - approach Resources and expertise to gather and interpret information on risks. Development of procedures and systems and to train personnel. Sound and well-trained judgment be exercised during implementation. Potential challenges Uncertainty regarding expectations. Difficulty in applying uniform regulatory treatment. Lack of understanding by customers on information and documentary requirements. PwC 24

25 Benefits and challenges of a risk based approach Potential benefits - Better management of risks and cost-benefits; Life insurance company and intermediaries focus on real and identified threats; Flexibility to adapt to risks that change over time. Potential challenges Identifying appropriate information to conduct a sound risk analysis; Addressing short term transitional costs; Greater need for more expert staff capable of making sound judgments; Greater need for appropriate training; Regulatory response to potential diversity of practice. PwC 25

26 Customer risk Business relationship or transactions in unusual circumstances Such as: Significant and unexplained geographic distance between residence or business location of the customer and the location where the product sale took place (or the location of the insurer s representative). Frequent and unexplained movement of accounts/policies/contracts/funds to different insurance companies or other financial institutions. Frequent and unexplained movement of funds between financial institutions in various geographic locations. Customers that are legal persons whose structure makes it difficult to identify the ultimate beneficial owner or controlling interests. PwC 26

27 Customer risk Customers who seek or accept very unfavourable account/policy/contract provisions or riders. Customers who rely on free look provisions in unusual circumstances. Charities and other not for profit organisations which are not subject to monitoring or supervision (especially those operating on a cross-border basis). "Gatekeepers" such as accountants, lawyers, or other professionals holding accounts/policies/contracts at an insurance company, acting on behalf of their clients, and where the insurance company places unreasonable reliance on the gatekeeper. Customers who are Politically Exposed Persons (PEPs). Customers where the beneficial owner of the contract is not known (e.g. certain trusts). PwC 27

28 Customer risk Customers who are introduced through non face-to-face channels. Customers who use unusual payment methods, such as cash, cash equivalents (when such a usage of cash or cash equivalents is, in fact, unusual), or structured monetary instruments. Customers who seek early termination of a product (including during the "free look" period), especially at a cost to the customer, or where payment is made by, or the refund check is directed to, an apparently unrelated third party. Customers who transfer the benefit of a product to an apparently unrelated third party. Customers who show little concern for the investment performance of a product, but a great deal of concern about the early termination features of the product. PwC 28

29 Product risk Features that increase product risk Acceptance of payments or receipts from third parties. Acceptance of very high value or unlimited value payments or large volumes of lower value payments. Acceptance of payments made in cash or endorsed money orders or cashier cheques. Acceptance of frequent payments outside of a normal premium policy or payment schedule. Allowance of withdrawals at any time with limited charges or fees. Acceptance to be used as collateral for a loan and/or written in a discretionary or other increased risk trust. PwC 29

30 Product risk Features that may increase product risk conti. Products that allow for high cash values. Products that accept high amount lump sum payments, coupled with liquidity features. Products with free look provisions, in particular when they are relied upon in unusual circumstances (e.g., no credible reason for reliance is present or a request is made to send the refunded monies to an unrelated third party, a foreign financial institution, or to an entity located in a high risk country). Products that allow for assignment without the insurer being aware that the beneficiary of the contract has been changed until such time as a claim is made. PwC 30

31 Country, geographic risk Factors that determine a country poses a higher risk Countries identified by FATF Statements as having weak AML/CFT regimes, and for which financial institutions should give special attention to business relationships and transactions. Countries or geographic areas subject to sanctions, embargoes, or statements of concern issued by international bodies such as the United Nations ( UN ), FATF, or governments. In addition, in some circumstances, countries subject to sanctions or measures similar to those issued by bodies such as the UN, but which may not be universally recognized, may be given credence by a life insurance company or intermediary because of the standing of the issuing body and the nature of the measures. PwC 31

32 Country, geographic risk Countries or geographic areas identified by credible sources13 as lacking appropriate AML/CFT laws, regulations and other measures. Countries or geographic areas identified by credible sources as providing funding or support for terrorist activities or that have designated terrorist organisations operating within them. Countries or geographic areas identified by credible sources as having significant levels of corruption, or other criminal activity. Countries or geographic areas where protection for customers privacy prevents the effective implementation of AML/CFT requirements and/or facilitates the framework for the establishment of shell-companies or the issuance of bearer shares. Cross border elements such as the insurer, the customer and the beneficiary of the contract being in separate jurisdictions. PwC 32

33 Governance and oversight 33

34 Governance and oversight Issues and challenges Identifying the requirements for global, regional and jurisdictional policies Preparing for AML/CFT assurance or regulatory reviews Assistance with remediation and other action to address AML/CFT gaps identified during assurance and regulatory reviews Setting up appropriate governance and organisational structures to evaluate and address AML/CFT risks as they arise Implementing a combined assurance model the role of internal audit, external audit, AML CFT officer, compliance department, management assurance, external experts PwC 34

35 People 35

36 People challenges Issues and challenges Defining the levels of AML/CFT training for the various stakeholders in your organisation based on their roles and responsibilities. Appointing persons into key roles in the organisation. Assessing the experience of persons in existing roles and the adequacy of their responsibilities e.g. key AML/CFT/Sanctions staff and those in oversight positions. Defining appropriate job descriptions and associated key performance indicators. PwC 36

37 Process and technology 37

38 Process & Technology Issues and challenges Understanding the impact of the varying customer due diligence and KYC requirements on your customers Identifying and dealing with higher risk relationships e.g. correspondent banks, politically exposed persons, trusts and partnerships Dealing with transparency and beneficial ownership requirements for legal persons and legal arrangements Establishing effective records management practices PwC 38

39 Process & Technology conti. Issues and challenges Meeting your regulatory obligations with regards to record keeping and document management while reducing the impact on your customers Meeting the various AML/CFT reporting requirements e.g. suspicious transaction reports, cash threshold reports, etc. Identifying the technology and process requirements for AML/CFT/Sanctions risk management PwC 39

40 AML/ CFT considerations for medium and small sized Governance operations Introduce a single policy that deals with the all of the AML CFT requirements throughout the organisation setting the minimum standards. People Appoint a person to perform more than one role. However these roles should be complimentary in nature and each role should be clearly defined e.g. compliance, AMLO, internal audit. Process and procedure Control measures should be adequate and effective. Roles can be shared but must be clearly understood and included in job descriptions. Manual or automated processes is dependant on the extent of the requirement e.g. screening and transaction monitoring. PwC 40

41 AML/ CFT considerations for medium and small sized Technology operations The system chosen should be appropriate to the size of the organisation and the intended output. Consider the use of exception reports as an alternative e.g. threshold reports, specific algorithms or rules based on known scenarios. Always consider the process surrounding the technology e.g. who will be managing and dealing with the results. PwC 41

42 Questions...? The information contained in this publication by PwC is provided for discussion purposes only and is intended to provide the reader or his/her entity with general information of interest. The information is supplied on an as is basis and has not been compiled to meet the reader s or his/her entity s individual requirements. It is the reader s responsibility to satisfy him or her that the content meets the individual or his/ her entity s requirements. The information should not be regarded as professional or legal advice or the official opinion of PwC. No action should be taken on the strength of the information without obtaining professional advice. Although PwC take all reasonable steps to ensure the quality and accuracy of the information, accuracy is not guaranteed. PwC, shall not be liable for any damage, loss or liability of any nature incurred directly or indirectly by whomever and resulting from any cause in connection with the information contained herein. PwC Inc. [Registration number 1998/012055/21]( PwC ). All rights reserved. PwC refers to the South African member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.

43 FEEDBACK FROM ONSITES

44 Section 21 Identity Verification Verification is not done in respect of the identity of clients and residential addresses Sec 21(1) Clients acquired prior 2001 no identification and verification done to date Sec 21(2). Reasons given: The FSP has inherited or taken over the client book from another FSP Those clients cannot be contacted and FSP is not going to go back and ask for the relevant FICA documents. Highly recommended for active accounts or if such old clients still transact with FSP iro the existing business relationship 44

45 Section 21 Identity Verification Proper CIV - FSPs do not always check the validity of the documents they receive Recordkeeping - clients files are not kept in an orderly, organised and good condition 45

46 Section 21 Identity Verification Clients source of funds is not verified FSPs merely ask the client where the money comes from FSPs argue that the FIC Act does not provide for verification of source of funds. Highly recommended based on risk management framework

47 Risk based approach Risk based approach is not adopted with regard to high risk clients such as non-face to face clients and politically exposed persons The FSPs normally do not risk rate their clients - FSPs would normally say that all their clients are treated as high risk clients. We recommend adoption of a risk management framework to risk rate clients Treat clients differently and check high risk clients against terror lists such as UN 1267 list. 47

48 Section 28 - CTRs Category 11A FSPs collect monies (above the prescribed cash threshold) from investors in an en-commandite partnership structure but do not report in terms of section 28 of FICA 48

49 Section 28A - TPR FSPs that are accountable institutions do not have procedures in place ito section 28A arguments in support is that their clients are well known and are not involved in any terrorist activity 49

50 Section 29 - STRs Health Services FSPs and Short Term Insurance FSPs no procedures in place to ensure compliance with section 29 (detecting and reporting suspicious transactions) 50

51 Section 42 - Internal Rules Internal rules are not in place If in place then it is a generic document with no details of the FSP on it it is just a document describing the different sections of the FIC Act, and is not customised to the nature of the business of the FSP (Not a contravention, but it is highly recommended). Where FSP s don t always have the capability to develop their own internal rules, they rely on external compliance practices such as Masthead and Moonstone and do not specifically customise them to the business operations of the FSP 51

52 Section 42 - Internal Rules FICA internal rules are templates received from the compliance officer and the FSP just changes the name and signs on the relevant pages - the only thing that differs from FSP to FSP is the name on the front page of the document. The FSPs who use internal rules at Group level and not customised to the subsidiary which happen to be the FSP Some FSPs don t even know what are FICA internal rules, they have delegated this responsibility to the compliance officer to ensure such a document is in place. 52

53 Section 42 - Internal Rules The internal rules are not always adopted by management. Section 42 doesn t specifically state that they must be adopted but it makes sense for them to do so (whether it s approved at Board level or signed off by the sole proprietor). Internal Rules does not give proper guidance on the procedures that have to be followed in order to meet FICA obligations by the FSP and its staff We have noted that KYC is conducted even though the FSPs do not have the internal rules in place or do not provide proper clarity on the procedures to be followed. 53

54 Section 43- Training Not all staff are trained on FICA, just the representatives It must be noted that it is not only the representatives that interact with clients. Some admin staff may need to be trained, especially in the CIV and client take on process. Based on your risk management framework, decide which employees need training and the extent or level of such training Training is provided on the FIC Act only, it excludes internal rules Training and testing are confused: FSPs replace training with writing electronic tests which in my view should be applied only to determine how effective the training they received was and not to replace training 54

55 Section 43 - Training FSPs normally conduct FICA training at induction and thereafter refresher training is not done. FSPs argue that the Act does not provide for refresher training. Highly recommended in order to stay abreast with new developments Review of the training registers reveal that training is done but the FSPs cannot explain the content of training provided.

56 Confusion Confusion as to whether FSPs are accountable or reporting institutions. This is in the motor dealers industry. Such FSPs are licensed to render financial services on long term insurance products but as their core business is that of a motor dealership, it is their belief that the FSP is a reporting institution only. The key individuals of such motor dealerships do not believe that the FSP is both accountable and reporting institution. (This is an interpretation and training issue though) 56

57 Confusion There are Short-term Insurance FSPs and Health Service FSPs with Long-term Insurance products on their licences but they are not registered with the FIC as they claim that they are only using the short-term and/or health benefits categories. Short-term and Health Service FSPs who still refer to the old Schedule 1 of FICA and argue that they do not carry on long-term insurance business

58 Confusion The smaller FSPs don t always understand when they are required to conduct KYC procedures on their clients and when they are exempted so they generally just get the identification documents from all their clients to be safe The smaller FSP s still don t understand that they are an accountable institution in terms of Schedule 1 and need to register with the FIC (quite often we pick this up on the Cat I FSPs without CO compliance reports). 58

59 Tea Break 10 Minutes