AML/CFT IMPLEMENTATION IN THE ESAAMLG REGION

Transcription

1 AML/CFT IMPLEMENTATION IN THE ESAAMLG REGION P R E S E N T A T I O N A T A C G C C R O U N D T A B L E O N I M P R O V I N G T H E R E G U L A T I O N O F S O M A L I R E M I T T A N C E S H I L T O N N A I R O B I M A Y B Y D R E L I A W O N Y J K I S A N G A E X E C U T I V E S E C R E T A R Y E S A A M L G

2 Outline of the Presentation 2 1. Overview of Status of ESAAMLG Member Countries 2. Key Challenges facing Financial Institutions 3. Benefits for Implementing AML/CFT Requirements 4. Conclusion

3 Status of ESAAMLG Performance 3 First round of evaluations completed in 2011 registered a low level of compliance with FATF Recommendations. As per Chart 1 below, the Region s performance as measured against the FATF 40 Recommendations and 9 Special Recommendations was as follows: fully compliant with only 5% of the Recommendations; Largely compliant with 10% of the Recommendations; Partially compliant with 35% of the Recommendations; Non-compliant with 49% of the Recommendations.

4 Status of ESAAMLG Performance (cont..) 4 Chart 1: Global Performance N/A 1% C 5% LC 10% NC 49% PC 35%

5 Status of ESAAMLG Performance (cont..) 5 Except for one, all the countries have anti-money laundering legislation. 5 countries are under the ICRG process of the FATF. However, all countries are making efforts to address AML/CFT deficiencies. The private sector has an important role in assisting respective countries compliance with AML/CFT international standards.

6 Status of ESAAMLG Performance (cont..) 6 Performance in Recommendations relevant to the Financial Sector contributed to the overall decimal performance. Rating Rec. 5 CDD Rec. 6 PEP Rec. 7 Correspondent Banking Rec. 8 New Technologies C LC PC NC None of the countries secured a rating of C or LC in Rec countries (out of 16) registered an NC in each of the 4 Recommendations.

7 Challenges Faced by Financial Institutions 7 Lack of or unclear legal and regulatory frameworks Financial institutions are operating in an environment where there is no AML/CFT law or the laws are not clear enough to facilitate effective compliance. Absence of risk-based approach to AML/CFT Most countries have not yet conducted risk assessments As such, the laws are applied equally to all reporting institutions without taking into account risk. Most financial sector supervisory authorities have not adopted risk-based approach in AML supervision.

8 Challenges Faced by Financial Institutions (cont.) 8 Financial institutions face challenges in conducting risk assessments and adopting risk-based policies and procedures. Lack of engagement by Directors and Senior Management A right tone has not been set at the highest level of financial institutions on the importance of recognising AML as an integral part of business management. As a result, AML issues do not have adequate budgetary support- training and IT investment.

9 Challenges Faced by Financial Institutions (cont.) 9 Inadequate Know Your Customer Procedures Lack of national ID in some jurisdictions or central database to authenticate IDs. Inability to establish identity of beneficial owners. Lack of transaction monitoring systems Most financial institutions don t have transactions monitoring systems and therefore not able to detect unusual or suspicious activities. Weak internal control frameworks Lack of appropriately qualified personnel to carry out independent testing of the AML systems and controls.

10 Challenges Faced by Financial Institutions (cont.) 10 Business versus compliance? Some institutions relax KYC requirements because they want to attract customers to boost revenue streams. Reluctance of financial institutions to share information about customers. Ineffective AML regulation/ supervision Most jurisdictions have not developed capacity to undertake effective AML supervision and apply sanctions against non-compliance.

11 Why should Directors be concerned? 11 Failure to comply with the AML laws and regulations has adverse consequences on the board and the bank such as: In respect of the board: Imposition of monetary penalties against directors; imprisonment of directors, In respect of the bank: Monetary penalties, Reputational damage- loss of public confidence, withdrawal of a licence (or bank failure). Counter-measures from counterparties in the global financial market which increase costs of doing business.

12 Why should Directors be concerned? (cont..) 12 ML threatens safety and soundness of financial institutions. A number of factors led to the global financial crisis, but laxity in adhering to risk management practices features a lot in a spate of literature. Financial institutions are therefore called upon to embrace the new religion of enterprise wide risk management which recognises financial & nonfinancial risks- which includes ML and TF risks.

13 The Role and Obligations of Directors Board of Directors must: 13 ensure that the institution conducts ML & TF risk assessment in compliance with International AML/CFT standards (FATF Rec. 1). ensure that the institution has an AML Compliance Program commensurate with its risk profile (to be discussed in detail in subsequent slides). Receive and consider reports from an AML Compliance Officer (through an appropriate Board Committee).

14 The Role and Obligations of Directors (cont..) Board of Directors must: 14 Require external auditors to assess the entity s compliance with the ML laws and regulations and report accordingly.

15 Components of an AML Program 15 The AML Compliance Program must provide for the following minimum requirements: Board approved AML policies and procedures which must be informed out of the risk assessment (FATF Rec.1). Must provide for a Board oversight arrangements through an appropriate Committee of the Board. Must provide for record keeping for at least a period of five years (FATF Rec. 11) An effective internal control system that includes suspicious transaction monitoring system and reporting (Rec. 18 & 20).

16 Components of an AML Program (cont..) 16 An independent audit function to test its AML systems and procedures. Must have an on-going AML training program. The training should cover regulatory requirements and the bank s internal requirements. Must provide for disciplinary procedures against members of staff who don t comply with the internal AML requirements. This must be contained in the terms and conditions of employment.

17 Summary of the AML Program Appointment of an MLRO Policies and procedures Central point of contact Accessing KYB details National & international findings Internal reporting External reporting Internal antimoney laundering procedures KYC KYB Transaction monitoring Exceptions reporting Communicate policy to staff Training Job description Disciplinary procedures Record keeping Independent audit and reports Assessment of AML/CFT & Report to Board Internal Audit / Compliance reviews

18 Conclusion 18 Status of compliance with international AML/CFT standards varies from country to country. However, there is a general low level of compliance in the region. Financial institutions face some challenges that affect their compliance with AML/CFT requirements. Compliance with AML/CFT requirements is beneficial to the financial institutions and the countries in which they operate. Implementation of a robust AML/CFT regime requires concerted and collaborative effort. Hence, the support of financial institutions is important.

19 19 THANK YOU Eliawony J Kisanga ekisanga@esaamlg.or.tz