INCREASING EXPECTATIONS OF MONEY LAUNDERING REPORTING OFFICERS AND COMPLIANCE OFFICERS

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1 INCREASING EXPECTATIONS OF MONEY LAUNDERING REPORTING OFFICERS AND COMPLIANCE OFFICERS CHERYL E. BAZARD PRESIDENT, BAHAMAS ASSOCIATION OF COMPLIANCE OFFICERS PRINCIPAL, BAZARD & CO. CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

2 EVOLUTION OF CRIME Ponzi schemes Money Laundering Terrorist Financing Cyber Attacks Since 2011, the top British banks have paid 61% of their profits in penalties and restitution. CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

3 COMPLIANCE RISK THE RISK OF LEGAL OR REGULATORY SANCTIONS, FINANCIAL LOSS OR LOSS TO REPUTATION THAT A BANK MAY SUFFER AS A RESULT OF ITS FAILURE TO COMPLY WITH ALL APPLICABLE LAWS, REGULATIONS, CODES OF CONDUCT AND STANDARDS OF GOOD PRACTICE. Basel Committee on Banking Supervision Compliance and the compliance function in banks (April, 2005 Bank for International Settlements) CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

4 RESPONSIBILITIES OF COMPLIANCE OFFICER Ensure that the financial institution fully complies with the statute laws and regulations of the Bahamas, guidelines and best practices; Establish a written compliance policy that contains the basic principles to be followed by management and staff Establish and communicate a compliance policy Ensure that the compliance policy is observed Ensure that appropriate remedial or disciplinary action is taken if breaches occur CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

5 RESPONSIBILITIES OF COMPLIANCE OFFICER Identify and assess compliance risk issues facing its organization Educate staff on compliance issues and act as a contact point within the bank for compliance queries from staff members IN ESSENCE ENSURE THAT A COMPANY IS CONDUCTING ITS BUSINESS IN FULL COMPLIANCE WITH ALL NATIONAL AND INTERNATIONAL LAWS AND REGULATIONS AS WELL AS PROFESSIONAL STANDARDS, ACCEPTED BUSINESS PRACTICES AND INTERNAL STANDARDS Robert Walters CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

6 RESPONSIBLITIES OF COMPLIANCE OFFICERS Letter of the Law/Spirit of the Law Rules based approach/principles based approach Head Office approach v. country suitability approach CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

7 ISSUES If the CO chooses principles based approach (Could do v. should do):- Supervisory predictability Consistency Use of hindsight How does one spread the compliance culture in light of personal liability of COs If compliance is everybody s business, is compliance a support function that removes scaffolding once the job is done? CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

8 ISSUES The need to satisfy multiple demands from different stakeholders (private register bill???) ETHICS OF OBEDIENCE V. ETHICS OF CARE AND OF REASON Martin Wheatley, Chief Executive of the Financial Conduct Authority (FCA) in the UK Dilemma Tick the box to produce audit trail CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

9 COMPETING STAKEHOLDERS The Board Risk Committee Law Enforcement Agencies Regulators Compliance Committee Authority Competent Audit Committee CEO Front Line Operations Internal Audit CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER, This Photo by Unknown Author is licensed under CC BY-NC-ND

10 3 LINES OF DEFENCE Operational Management The Business Risk Management and Compliance Monitoring Control Functions Assurance Internal Audit CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

11 HOW COMPLIANCE OFFICERS ARE VIEWED Advisor Monitor Manager of regulatory relationships Partner with the business Big Brother Combination of partner and big brother Truly independent? CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

12 MONEY LAUNDERING REPORTING OFFICERS As per the Central Bank of the Bahamas Guidelines for Assessing the Fitness and Propriety of MLROs in The Bahamas 1. Sufficient level of authority and independence 2. Sound understanding of the laws evidenced by a relevant professional qualification 3. Meet the test of fitness and propriety as determined by the regulator CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

13 MONEY LAUNDERING REPORTING OFFICERS Registered with the FIU Report Suspicious Transaction Reports to the Focal Point Officer Note the change of disclosures into 2 classes: - protected and authorized Note the changes in the definition of Money Laundering by the FTRA, 2018 CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

14 PROOF OF MONEY LAUNDERING S.8 For the purpose of this part (a) No conviction for an offence shall be necessary to prove that the property is directly or indirectly the proceeds of crime, nor shall it be necessary to prove that a specific offence has been committed by any person; (b) knowledge, suspicion, intent or purpose may be inferred from objective factual circumstances (Vienna and Palermo Conventions) CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

15 ARRANGEMENTS CONCERNING PROCEEDS OF CRIME S. 10 A person commits an offence of Money Laundering if he knows, suspects or ought to reasonably have known or suspected that he has entered, or is entering into an arrangement which facilitates, by whatever means, the acquisition, retention, use, concealment or the control of proceeds of crime by or on behalf of another person. CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

16 THE OFFENCE OF MONEY LAUNDERING Section 11(1) A person who knows or suspects or ought to reasonably have known or suspected that he (a) Acquired or is acquiring the proceeds of crime; (b) used or is using the proceeds of crime; or (c) possessed or possesses the proceeds of crime, Commits an offence of money laundering CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

17 THE OFFENCE OF MONEY LAUNDERING 11(2) For the purposes of this section (a) a person acquires property for inadequate consideration if the value of the consideration is significantly less than the value of the property; (b) a person uses or has possession of property for inadequate consideration if the value of the consideration is significantly less that the value of the use of possession; (c) the provision by a person of goods or services which he knows or suspects may held another to carry out criminal conduct is not consideration. CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

18 OBLIGATIONS OF THE INDUSTRY/COMPLIANCE OFFICERS/MLROS Protecting Preventing Client Due Diligence Quality Reporting Quality Reporting Timing Reporting Failure to Report

19 CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

20 WHAT DID WE GET? More requirements More Expectations More requests NEED I SAY. More Work More documentation More screening More analysis CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

21 THOMSON REUTERS REPORT BREAKDOWN OF WORK WEEK 16% - tracking regulatory developments 14% - reporting to the board and amending policies and procedures 54% - interacting with regulators, regulatory inspections and exams, regulatory reporting, project management of regulatory implementation, compliance monitoring and training 16% - Liaise with control functions CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

22 WHAT WE MEANT BY MORE Additional resources Access to train the trainer courses More industry updates More consultation Personal liability insurance coverage CBOB AML/CFT RISK MANAGEMENT CONFERENCE - 18TH SEPTEMBER,

23 ROLE OF THE FIU Collect Register Process Analyze Feed back Produce Annual Reports

24 ISSUES:- Turnover at FIUs Timing of Analysis Conduct investigations into developments in the field of ML and TF Us v. Them Small communities Officers charged with bringing prosecutions:- Do they understand the business? What is being charged with fraud and theft cases?

25 SUGGESTIONS Quarterly meetings Findings vs. statistics

26 THANK YOU