Private Equity Administrators shares some insights into developing great AML practice

The Financial Conduct Authority (FCA) has fined Standard Bank PLC (Standard Bank) £7,640,400 for failings relating to its anti-money laundering (AML) policies and procedures over corporate customers connected to politically exposed persons (PEPs). Tracey McDermott, director of enforcement and financial crime at the FCA, commented:

“If banks accept business from high risk customers they must have effective systems, controls and practices in place to manage that risk. Standard Bank clearly failed in this respect.”

Not only is this the first AML case to use the new penalty regime, which applies to breaches committed from 6 March 2010, but under the new regime we expect to see larger fines being imposed on financial institutions.

Talking of large fines, we only need to look across the pond to see the US flexing their muscles at the enforcement of over $12 billion worth of fines settled with some of the world’s largest banks, all for violation of the AML & Sanctions legislation.

So what are Private Equity Administrator’s (PEA) top 10 tips for staying clear of the long arm of the law?

  1. Make AML issues a priority for all senior management – accountability and ownership is key to your success.
  2. Create a CDD & KYC strategy – align the legislation knowledge gained by the organisation with the management and mitigation of risks associated with each individual client.
  3. Allocate costs to experienced AML personnel – this is far cheaper in the long run than a large fine.
  4. Be thorough with your policies and procedures – ensure you are able to maintain consistency across your global subsidiaries and group companies.
  5. Know your PEPs – engage senior management in key sign off procedures
  6. Do you use MT202COV SWIFT? If not, have the best awareness of Sanctions law – the UK Sanctions regulation is set by Her Majesty’s Treasury (HMT) and the U.S. regulators Office of Foreign Asset Control (OFAC).
  7. Monitor and validate the authentication of your organisation’s processes policies and procedures – this creates annual reporting that can devise strengths & weaknesses resulting in action plans to improve your firm’s policy & procedures.
  8. Invest in a transaction monitoring system – yes, regulation is outpacing their development, but encouraging your software providers to get all their clients under one roof to discuss their needs, gives you a better chance to outrun the regulator.
  9. Proposals for the EU’s Fourth Money Laundering Directive is in the final stages of legislative process – transposition into UK law is unlikely for another couple of years, therefore assessment should be made as to what changes the directive could bring in and also how it could affect the way your firm conducts business with its clients. Current systems and procedures should be reviewed and new measures implemented in preparation for the application into law.
  10. If you haven’t had a visit yet from your regulator, chances are you are on their list – get prepared!

If you require further support with your AML undertakings, feel free to call James in Guernsey or Peter in Denmark:

James Orrick / +44 1481 730988 / jo@peadm.com

Peter Toyberg / +45 70 20 40 61 / pt@peadm.com

Further reading:

KPMG https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-anti-money-laundering-survey/Documents/global-anti-money-laundering-survey-v3.pdf

FATF http://www.fatf-gafi.org/

FCA http://www.fca.org.uk/

HMT https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets

OFAC http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx

 

 

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