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Securities

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Action needed & Key Dates. Is / should the MLRO be 'the focal point' ... (With thanks to 'Regulus') 4. What Has Changed? The law ? Not a word. FSA rules ? Yes ! ... – PowerPoint PPT presentation

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Title: Securities


1
Securities Investment Institute Compliance
Forum.
  • Towards complying with the Risk-based Approach
    a new role for MLROs?.
  • 17th May, 2006.

2
Presentation Structure
  • A bit of History.
  • Key Changes.
  • New FSA Rules (SYSC).
  • JMLSG Guidance 2006.
  • Action needed Key Dates.
  • Is / should the MLRO be the focal point?
  • Is there a Bi-focal point now?
  • The positive view of the MLRO role.

3
The Species MLRO
  • Hitherto known as Praefectus Adligo Vinculum
    (Officer Responsible For Going To Prison !)
  • CHARACTERISTICS
  • An almost unquenchable desire to do good in the
    face of great adversity.
  • A willingness to explain over over again- the
    concept of tipping off.
  • A touching belief that knowing the customer
    really , honestly, genuinely, is a good idea !
  • An un-natural familiarity with jurisdictions
    where all things / names are negotiable !
  • A stoic ability to cope with solitude, cynicism,
    apathy, indifference venal hostility
  • (With thanks to Regulus)

4
What Has Changed?
  • The law ?  Not a word.
  • FSA rules ?  Yes !
  • JMLSG Guidance ? Yes !
  • Net effect ?  Time FSA/FATF will tell!
  • NOTE!
  • RBA is a step change for many firms!
  • Important changes of emphasis
  • Some key relationship challenges

5
JMLSG Guidance 2006 FSA SYSC rules Key
Changes.
  • Increased SM Involvement
  • Increased focus on Systems and Controls
  • Increased focus on risk assessment
  • Flexibility introduced re IDV relative to risk
  • Increased KYC and monitoring but effort relative
    to risk

6
JMLSG Guidance 2006 FSA SYSC rules Key
Changes.
  • 6. Increased focused training with effort
    relative to risk
  • 7. Keeping records more important than ever.
  • 8. Demonstrate a proportionate reasonable
    approach.
  • 9. Holistic view / approach to Financial Crime.

7
Key changes
  • Increased risk assessment
  • (Part 1 Chapter 4)
  • Discrete steps to be taken (JMLSG 4.2 SYSC 3.2.6F
    G)
  • Identify potential risks for sector
  • Assess actual risks from customers and products
  • Design and implement controls to manage actual
    risks
  • Monitor and improve effective operation of
    controls
  • Keep appropriate records of what done and why

8
Key changes
  • Increased risk assessment
  • (Guidance, Part 1 Chapter 4)
  • No fixed approach (JMLSG 4.6- 4.12 SYSC 3.2.6F G)
  • Simple or complex to reflect business
  • May be product or customer lead
  • Often results in formal categorisation
  • High/Medium/Low
  • Products, Customers etc allocated
  • Controls designed to match risk

9
Key changes
  • Increased risk assessment
  • (Guidance, Part 1 Chapter 4)
  • Considerations/recommended questions to consider
  • (JMLSG 4.13 4.18)
  • Nature of products
  • Nature of customers
  • Interaction between customers and products
  • Geography
  • Delivery

10
Key changes
  • Increased risk assessment
  • (Guidance, Part 1 Chapter 4)
  • Implement controls to manage risks(JMLSG 4.19
    4.26)
  • Vary ID V procedures and documentary
    requirements to reflect risk
  • Vary amount of additional KYC info to reflect
    risk
  • Vary monitoring effort to reflect risk

11
Key changes
  • Increased risk assessment
  • (Guidance, Part 1 Chapter 4)
  • Simple or complex the approach and result must
    be
  • Documented
  • Endorsed by the Board/Senior Management
  • Kept under review (annually)
  • (JMLSG 4.29 4.33 Chapter 1 and 3)

12
Key changes
  • Increased risk assessment
    (Guidance, Part 1 Chapter 4)
  • Document and defend
  • FSA Supervisors attitude?
  • Not to challenge assessment providing a
    responsible and reasonable approach taken?
  • Read FSA letter to JMLSG, 10TH April, 2006.
  • Assessment down to SM
  • No level playing field
  • Probably AML will become a competitive issue.

13
Action RequiredAction Required
Assess document risk profiles for
S.M.sign-off. Review/Amend policies,
procedures, systems controls.
Determine revised staff training needs training
strategy going forward. Monitor
report back to S.M. via project management
discipline.
14
Key Dates Guidance published 1st
February, 2006 Treasury approval 13th
February, 2006 FSA SYSC Rules in full
effect from 1st September, 2006. FATF
evaluation due Oct/Nov, 2006.
15
The MLRO Interaction of law,rules Guidance (1)
  • Remains controlled function ) SYSC 3.2.6I R
  • Must still be approved person ) APER 4.7.9 R
  • Can also be nominated officer under POCA(
    JMLSG PT.1ch.3.4)
  • Nominated Officer / MLRO for relevant
    business ( ch.3.1 3.2)
  • Ultimate Senior Management responsibility - can
    be all 3 roles

16
The MLRO Interaction of law,rules Guidance (2)
  • AML / financial crime responsibility of Senior
    Management (sysc 2.1.1./ 2.1.3 / 3.1.3 / 3.2.6H
    R)
  • Director or Senior Management allocated
    responsibility (ch.1.23)
  • Can also be MLRO (ch.1.24 SYSC 3.2.6 H R)
  • Senior Management to take ownership (ch.2)
  • Held Accountable (ch.2)
  • BUT!!!
  • POCA obligations of MLRO
  • Interface of S.M./ Director with MLRO is key
    (ch.1.24)
  • MLRO / FSA interface (ch.3.6)

17
Standing of MLRO
  • Threshold competence required
  • Able to act on own authority
  • Adequately resourced
  • Continuing training to remain competent
  • Linkage with A.P.E.R. Code principle 7  (ch 3.6,
    SYSC 3.2.6I R)
  • Continuing focal point for all aspects.
    (ch.3.9).

18
MLRO - Senior Management Relationship
  • Support / coordinate Senior Management focus on
    managing money laundering risk in individual
    business areas  --- new ! (ch.3.10)
  • Responsible for offering training standards
    scope  --- new ! (ch. 3.26)
  • Remember !  -- ultimate responsibility is Senior
    Management (sysc 2.1.3.R./ 3.2.6.R/ ch.2.5).
  • MLRO annual report (ch. 3.29 3.37).
  • MLRO to monitor effectiveness of SYSC in firm 
    (ch.3.28)
  • caesar ad praefectus adligomant vinculum !!

19
Position of the MLRO The NEGATIVE View
  • The meat in the sandwich

20
Position of the MLRO The POSITIVE VIEW - at the
centre of everything!
21
A Final ThoughtTHE FSA VIEW
  • The REAL FSA Requirement?
  • To see that SENIOR MANAGEMENT are involved in
    MANAGEMENT of the RISKS of money laundering in a
    thoughtful consistent and responsible manner
  • The MLRO is the key player in making this happen

22
SII Compliance Forum.
  • Presentation, 17th May, 2006.
  • david.blackmore_at_mhagroup.co.uk
  • Tel/Fax 02476 466492.
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