Connecting the Compliance Dots: The Role of Audit, Anti Money Laundering and the Business Unit

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Beverly Carr
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1 Connecting the Compliance Dots: The Role of Audit, Anti Money Laundering and the Business Unit A jointly sponsored event by ACAMS, IIA, and ISACA. Use of these materials without the express written permission of all three associations is prohibited.

2 Before We Begin Recording of this Event Your Event Console CPEs CAMS Credits Q&A Session Polling Questions Demonstration

3 Moderator: John J. Byrne, CAMS Executive Vice President Association of Certified Anti Money Laundering Specialists Panelists: Peter Fitzgerald Principal Forensic & Dispute Services AML Consulting Deloitte Financial Advisory Services LLP Jack Sonnenschein Vice President of Enterprise Compliance Risk Management American Express Christopher Westerman, CISA, MBCS CITP Director of IT Audit for the Americas Bank of Tokyo Mitsubishi

4 Agenda Level setting Framework review The Five Questions Panel Questions on the Five Questions Viewer Questions

6 Institutions required to have AML and related obligations* (way beyond the banking industry) Banks Broker Dealers MSBS Mutual Funds Insurance Companies Credit Card Systems Dealers in Precious Stones Casinos Futures Commission i Merchants Introducing Brokers in Commodities Dealers in Precious Metals Jewelers * All individuals for OFAC requirements

7 Overview of AML Audit Process Pre exam Activities During Exam Post Exam

8 Overview of AML Audit Process Pre exam Activities Coordinate independent testing with AML Compliance testing and business unit self assessment activities Meet with the AML Compliance Officer and relevant Business Unit /Support Function Managers (e.g., Business, Operations) to agree on timing of the audit, as well as, availability of necessary staff Conduct Risk Assessment Consider conducting more granular testing of high risk areas or areas with noted deficiencies Update testing activities as a result of the risk assessment and also to reflect changes in the institution s businesses/activities, policies, processes and systems

9 Overview of AML Audit Process During Exam Assess overall adequacy of the Compliance function (i.e., level of staffing, qualifications of AML Officer and staff, management reporting, etc) Assess Risk Assessment process Business Risk Assessment (AML as well as OFAC) and Customer Risk Assessment process Assess Governance/Oversight, e.g., Tone at Top, Management Reporting, Reporting Lines Assess policies, procedures, processes and controls Assess/Test compliance with applicable regulatory requirements Test previous regulatory exam and audit findings and assess whether noted deficiencies have been corrected, are in the process of being corrected, or if there isa plan isin in placeto addressopen issues

10 Overview of AML Audit Process Post Exam Communicate findings to the Board, Senior Management, Compliance and affected business units Maintain adequate and accessible BSA/AML audit documentation, including audit programs, work papers, results, and management responses Maintain an audit log to track the progress of remediation efforts related to identified audit findings and periodically report on progress Escalate any significant deficiencies or areas at risk to Senior Management, Compliance and the Audit Committee

11 BSA/AML Independent Testing Framework 1. Risk Assessment 10. Communication 2. Policies, Procedures, Process 9. Training 8. Validation Evaluation of Overall Integrity and Effectiveness of Institution s BSA/AML Program 3. AML Audit Risk Assessment 4. Standard Audit Procedures 7. Corrective Action Tracking 6. Coordination with Compliance Monitoring 5. Transaction Testing

12 BSA/AML Independent Testing Framework Review BSA/AML Policies, i Review Bank s AML Risk Assessment: Procedures/Processes: KYC, CIP, Customers, Products, Channels, Reporting and Training Geographies AML Audit Risk Assessment to determine nature, scope and timing of BSA/AML audit procedures Standard Audit Procedures for consistency and completeness Transaction Testing: recordkeeping, suspicious activity monitoring and reporting Ongoing Monitoring and reviews of Key Risk Indicators Tracking Corrective Actions to ensure issues are resolved Validation and testing to confirm corrective actions are effective and sustained Reviews of Training for Bank Staff and Internal Audit Communication: Board of Directors/Audit Committee, Senior Management 12

13 BSA/AML Audit Risk Assessment Model Primary Risk Factors Secondary Risk Factors Customer Risk Reporting, Detection & Monitoring Risk Product Risk Composite Inherent Risk Identification i & Verification Risk AML Audit Risk Compliance Risk Geographic Risk Regulatory/Prior Audit Risk

14 AML Skills Assessment Objective Ensure adequacy of AML expertise in order to perform independent testing as required by the Bank Secrecy Act Program. Appropriate AML expertise is matched to AML exams, Growth and learning opportunities for auditors in performing and supervising AML audit work are recognized AML training requirements for auditors are identified. Methodology Develop skills matrix Inventory of AML expertise Analysis Recommendations Develop Action Plan Track kimplementation ti 14

15 AML Skills Matrix Core regulatory topics: High Risk Products and Customers: BSA/AML Compliance Program Funds Transfers AML Risk Assessment Private Banking Customer Identification Program Foreign Correspondent Banking Customer Due Diligence Broker/Dealers Suspicious Activity Monitoring/Reporting MSBs Currency/MI Reporting/Recordkeeping Pouch Activity OFAC Pay Through Accounts Information Sharing Concentration Accounts Nondeposit Investment Products Trade Finance Trust and Asset Management PEPs NRAs 15 BSA/AML Technology: KYC/CIP Systems OFAC Screening Surveillance Systems Case Management Systems Unusual of Suspicious Activity Reporting Systems

16 Five Questions 1. Have you completed a training needs assessment? 2. What is the knowledge level and expertise of Auditors? 3. How do you communicate with your regulators so as to be able to adequately demonstrate your FI s knowledge to the regulators? 4. Is your coverage of AML broad enough to address other areas? (i.e. sanctions, bribery, corruption, financial crime) 5. Does the Audit staff understand systems and related AML technology tools?

17 Have you completed a training needs assessment?

18 What is the knowledge level and expertise of Auditors?

19 How do you communicate with your regulators lt so as to be able to adequately demonstrate your FI s knowledge to the regulators?

20 Is your coverage of AML broad enough to address other areas?

21 Does the Audit staff understand systems and related AML technology tools?

22 Viewer Questions

23 Five Questions To Ask Your Team Have you completed a training needs assessment? What is the knowledge level and expertise of Auditors? How do you communicate with your regulators so as to be able to adequately demonstrate your FI s knowledge to the regulators? Is your coverage of AML broad enough to address other areas? (i.e. sanctions, bribery, corruption, financial crime) Does the Audit staff understand systems and related AML technology tools?

24 Thank You for Attending

FinCEN s Proposed Anti-Money Laundering Compliance Requirements for Investment Advisers: How to Prepare Now

FinCEN s Proposed Anti-Money Laundering Compliance Requirements for Investment Advisers: How to Prepare Now I. INTRODUCTION On August 25, 2015, the Financial Crimes Enforcement Network ( FinCEN ) proposed