Caribbean Indigenous Banks AntiMoney Laundering Survey

1
Caribbean Indigenous Banks Anti-Money Laundering
Survey

• An analysis of the local challenges

Patricia Hamilton CEO Caribbean Association of
Indigenous Banks Inc.
2
An Integrated Approach
Compliance Requirements
International, Regulatory, Industry, Third Party,
Internal
Anti-Money Laundering Strategy
Business and organisation
Processes Initiatives
.
Investment suitability
Security technology usage
Risk assessment
Tax etc.
Investent suitability
Training and Awareness Program
Management Commitment
Administrative and end
-
user
policies and procedures
-
KYC
Data
Transaction Monitoring/
Tactical short term
AML Reporting
Tracking Processes
Access/Mining
solutions
Cost of Compliance
3
Challenges
4
Challenges Management Support
5
Management Support

• AML is a key value a function of the integrity
  of the company and as such must be promoted by
  directors and management.
• Key values are supported by management behavior
• - Visible attention and appreciation
• - Agenda item in board meetings
• - Element of staff assessments
• - Available budgets for IT, training etc.
• - Status powers of the AML officer

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The tone on top
Most consider management to be supportive.
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Challenges Business vs. Compliance
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Centralized vs. Decentralized Compliance Function

• Centralized
• Advantages
• Limits differing interpretations
• Limits data entry error
• Quality Control is easier
• Disadvantages
• Skills required of staff
• Backlog

• Decentralized
• Advantages
• Skill set applied to entry
• Disadvantages
• Quality Control
• Enforcement

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Management of AML efforts should come from
throughout the organization

• Establish a culture of compliance
• Set tone at the top
• Top management is ultimately responsible for
  compliance
• Business is responsible for day-to-day compliance
• Compliance management plays a key role in
  corporate governance, monitoring and advisory
  functions

10
Centralized vs. Decentralized
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Challenges Technology
12
Technology as a compliance enabler
Rules Refinement
Customer Profiling
Manual
Workflow
Where most Caribbean banks are
Enterprise Profiling
Integrated Organization
The above maturity model depicts how Compliance
systems can evolve
Advanced Monitoring
13
Support systems
Just above half report adequate manual
technological support.
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Use of Technology for AML
77 have either invested or have plans to invest
in the future.
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Capabilities of Transaction Monitoring Software
A Client Profiling B Transaction Profiling C
Historic Client Behaviour D Pattern Recognition
of Transactions E Peer Grouping F All of the
Above
Most respondents report that their transaction
monitoring system has all 5 features.
16
Reviewing Transaction Monitoring software for gaps
17
Impact of Software
18
Challenges Training
19
Training Critical components
20
Caribbean Financial Action Task Force
21
Challenges Accountability
22
Accountability- A necessity

• The key challenge for many financial institutions
  is to sustain the effectiveness of their AML
  programs on an ongoing basis.
• An AML Accountability Review addresses issues
  related to corporate risk management and the
  legal liability of corporate directors, officers,
  supervisors and staff in managing the reporting
  cycle for suspicious transactions.

23
Regulatory Bodies Governing
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Familiarity with consequences for breaches
Most staff are considered to be familiar with
consequences for breaches.
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Challenges Human Resources
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How do we rank?

• Experience in other jurisdictions shows that a
  common problem is a lack of skilled and
  experienced staff with anti-money laundering
  expertise.
• How do we rank?

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Numbers of staff dedicated to AML
Most banks employ 1-5 staff whose primary duty is
AML. The majority of these are responsible for
Transaction Monitoring.
28
The skill-set of staff
Although in small numbers, staff are considered
to be adequately skilled in AML CFT.
29
Challenges Operations
30
The ideal operational infrastructure
Maintenance
Governance
Account / Transaction Monitoring
Policy Procedures
Risk Assessment
Organization Controls
Threads
RiskProfile
People
Process
Record Keeping / Retention
AML Regulatory Requirements
Technology
Reporting
Structure
Testing
Training / Testing
31
Budgetary Expenditure
33 have spent over US 100,000 on Transaction
Monitoring.
32
Specific Use of Budgetary Funds
A Increase in staff B Enhancements to existing
transaction monitoring system C Implementation
of automated transaction monitoring system D
Training E Conferences F Other
Most respondents reported a combination of
methods B, D E.
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Methods for indentifying suspicious activity
Least Used
A Reliance on employees vigilance B Review of
exception reports C Internally developed
transaction systems/exception reports D Vendor
supported automated transaction monitoring system
Most respondents (28) reported a combination of
methods A, B C while 17 reported using all
four methods.
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Policies Procedures
However, 50 of these apply only to the
Compliance department.
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To conclude
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Essential Elements of Effective AML

• Management support, commitment, accountability,
  tone at the top
• 2. Effective governance structure to oversight
  line of business functions
• 3. Comprehensive and actionable policies and
  procedures to reflect global and country specific
  requirements
• 4. Appropriate compliance communication,
  awareness, reporting, and education plan
• 5. Process to identify and implement
  regulatory requirements timely and effectively

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Essential Elements of Effective AML, contd.

• Monitoring/self-assessment programs to
  effectively detect violations and weak control
  systems
• Reporting and communication processes to ensure
  the status of significant compliance issues are
  communicated
• Tracking process for corrective actions required
  due to results from monitoring programs,
  complaints, Internal Audit, and regulatory
  reports
• Effective training programs
• 10. Involvement of compliance function in the
  development of new products and services

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Questions?
39
Caribbean Indigenous Banks Anti-Money Laundering
Survey

• An analysis of the local challenges
• Patricia Hamilton
• CEO Caribbean Association of Indigenous Banks Inc.