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ICBC AML Risk-Based Approach (Jan 2011) by Bachir El Nakib
 

ICBC AML Risk-Based Approach (Jan 2011) by Bachir El Nakib

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AML/CFT Risk-Based Approach ( Industrial and Commercial Bank of China - Jan 2011) by Bachir El Nakib

AML/CFT Risk-Based Approach ( Industrial and Commercial Bank of China - Jan 2011) by Bachir El Nakib

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  • Most crime is committed for money or some type of financial gain. Therefore, individuals committing crime need to engage in transactions with these funds to “disguise” the fact that the funds are derived from illegal activity. The funds must be laundered if they are to be secured and enjoyed. The underlying criminal (predicate) offense generates illegal proceeds. If there are any transactions with these proceeds, this constitutes “money Laundering” The Money Laundering Control Act first criminalized money laundering in the United States in 1986. The Three Stages of the Money Laundering Process: Placement - is the first stage , involves the physical introduction of bulk cash into the financial system. Typically accomplished through cash deposits and purchases of cash equivalent monetary instruments. At the placement stage, the funds are usually laundered relatively close to the under-lying activity, often, but not in every case, in the country where the funds originate. The major exception to this would be bulk currency smuggling which entails moving the physical cash proceeds to another country for placement. Layering - is phase 2. Layering involves separating the proceeds of criminal activity from their source through complex layers of transactions. The launderer seeks to separate the proceeds from the source through various complex layers of transactions. Typically involves more than one financial institution, and even better for obscuring the audit trail if more than one jurisdiction/country is involved. At this phase the launderer may choose an offshore financial center, a large regional business center, or a world banking center - any location that provides an adequate financial or business infrastructure. At this stage, the laundered funds may also only transit bank accounts at various locations where this can be done without leaving traces of their source or ultimate destination. I ntegration - the final stage, involved placing the laundered proceeds back into the economy in such a way that they re-enter the financial system as apparently legitimate funds. We will explore some products/services that are utilized at each stage of the process later in the presentation.
  • Most crime is committed for money or some type of financial gain. Therefore, individuals committing crime need to engage in transactions with these funds to “disguise” the fact that the funds are derived from illegal activity. The funds must be laundered if they are to be secured and enjoyed. The underlying criminal (predicate) offense generates illegal proceeds. If there are any transactions with these proceeds, this constitutes “money Laundering” The Money Laundering Control Act first criminalized money laundering in the United States in 1986. The Three Stages of the Money Laundering Process: Placement - is the first stage , involves the physical introduction of bulk cash into the financial system. Typically accomplished through cash deposits and purchases of cash equivalent monetary instruments. At the placement stage, the funds are usually laundered relatively close to the under-lying activity, often, but not in every case, in the country where the funds originate. The major exception to this would be bulk currency smuggling which entails moving the physical cash proceeds to another country for placement. Layering - is phase 2. Layering involves separating the proceeds of criminal activity from their source through complex layers of transactions. The launderer seeks to separate the proceeds from the source through various complex layers of transactions. Typically involves more than one financial institution, and even better for obscuring the audit trail if more than one jurisdiction/country is involved. At this phase the launderer may choose an offshore financial center, a large regional business center, or a world banking center - any location that provides an adequate financial or business infrastructure. At this stage, the laundered funds may also only transit bank accounts at various locations where this can be done without leaving traces of their source or ultimate destination. I ntegration - the final stage, involved placing the laundered proceeds back into the economy in such a way that they re-enter the financial system as apparently legitimate funds. We will explore some products/services that are utilized at each stage of the process later in the presentation.
  • In the U.S. there are now nearly 200 predicate crimes that constitute money laundering. Some of the illicit activities which are identified as predicate crimes under the Money Laundering Control Act can occur outside the U.S. The underlying criminal (predicate) offense generates illegal proceeds. If there are transactions with these proceeds, this constitutes money laundering. Criminal organizations commingle proceeds from many crimes; and Criminals act as brokers for funds unrelated to their own criminal activities. These trends make it more difficult to differentiate between drug-related money laundering and other forms of illegal money movements. Drug-related money laundering often supplies the “working capital” for other types of illicit activities, including a source of financing to terrorist groups (e.g., heroin trade in Afghanistan). Patriot Act Section 315 added foreign official corruption and certain foreign smuggling and export control violations to the U.S. list of predicate crimes. Tax offenses do not generally constitute a predicate offense for money laundering in most countries, with Mexico, however, a notable exception. Many people often confuse money laundering with fraud so you may want to highlight the differences. Fraud is carrying out a scheme to obtain money or any form of property by means of false pretenses. When a financial institution experiences a fraud it will incur a loss or disappearance of assets. When a financial institution is used to launder money it will not experience a loss unless funds are seized or frozen by the government. Money Laundering usually results in large quantities of illicit proceeds that need to be distanced from thsir source as quickly as possible in an undetected manner.
  • Illegal erworbene Mittel werden als 1. Schritt, dem Placement, auf einem Bankkonto angelegt. Als 2. Schritt, dem sog. Layering, wird die Herkunft der Mittel kaschiert. Dies geschieht durch verschiedene Methoden wie Überweisung der Mittel auf ein offshore Konto, durch Darlehen, durch falsche Rechnungen etc. 3. Und letzter Schritt, Wiedereinführung in regulären Wirtschaftskreislauf
  • Michael Matossian 2006 Middle East Conference – Harvard Arab Alumni Association
  • When CDD required—basic requirement A licensed party must conduct customer due diligence measures for a customer when— it establishes a business relationship with the customer; or it conducts a one-off transaction for the customer with a value (or, for transactions that are or appear (whether at the time or later) to be linked, with a total value) of at least the threshold amount; or it suspects the customer of money laundering or terrorist financing; or it has doubts about the veracity or adequacy of documents, data or information previously obtained in relation to the customer for the purposes of identification or verification. Note CDD must also be conducted under r 3.3.8 (Powers of attorney) and 3.3.10 (Wire transfers). In this rule: threshold amount means 55,000 Riyals (or its equivalent in any other currency at the relevant time). This rule is subject to the following provisions: rule 3.4.9 (Introducers) rule 3.4.10 (Group introductions) rule 3.4.11 (Intermediaries) rule 4.3.4 (When CDD may not be required—acquired businesses) rule 5.2.2 (2) (Licensed party must ensure no tipping off occurs).
  • Conduct detailed analysis of each category to better assess risk Purpose of the account Actual or anticipated activity in the account Nature of the customer’s business Customer’s location Products and services used by the customer
  • Identify specific risks categories Products and services Customers and entities geographic locations Product and Services Certain products and services offered by financial institutions may pose a higher risk of money laundering or terrorist financing Electronic funds payment services Electronic banking Private banking Trust and asset management services Foreign correspondent accounts (PTA’s and US dollar drafts) Loans secured by cash collateral and marketable securities Nondeposit account services (investment products and insurance)
  • How do we come up with the risk rankings to start with?
  • CLAMP model (Closed Loop Anti Money Laundering Program) A comprehensive and risk-based approach to AML compliance yields important benefits: Cost effective compliance with AML laws and regulations Reduced risk or reputational damage from regulatory action Increased protection of corporate assets and shareholder value
  • First line of defence owns day-to-day controls and procedures that manage risks Second line of defence interprets compliance risk and tailors procedures and control measures, to the risks facing the firm. Compliance monitors risk by testing controls. Secures corrective action for risks identified Third line of defence provides independent assurance to senior management that the model works Takeaway point: compliance is not an Island or a task done by just the Compliance Dept. – everyone has a role to play.
  • 02/14/12

ICBC AML Risk-Based Approach (Jan 2011) by Bachir El Nakib ICBC AML Risk-Based Approach (Jan 2011) by Bachir El Nakib Presentation Transcript

  • AML, KYC, Risk Based Approach, and Compliance Bachir El Nakib, CAMS Doha Branch , 21 March 2011 02/14/12 02/14/12 @2011 - ICBC Doha Branch
  • What Is Money Laundering ?
      • Money Laundering is the Process of Integrating the Proceeds of Crime into the Legitimate Stream of Financial Commerce by Masking its Origin
        • A process to make Illegitimate Funds Appear Legitimate
  • What Is Money Laundering ?
      • Concealing the existence or source of income from a crime
      • Disguising income from a crime so that it appears legitimate
      • Knowingly assisting a criminal in moving money or other property that constitutes the proceeds of criminal activity
  • Some Examples of Proceeds of Activities Which Constitute Money Laundering in Qatar & UAE are:
      • Drug Trafficking
      • Foreign Official Corruption
      • Embezzlement
      • Securities, Wire and Mail Fraud
      • Bribery
      • Terrorist Financing
      • Trafficking in Human Cargo
      • Racketeering
      • Arson
      • Foreign Smuggling & Export Control Violations
      • Money Derived From Predicate Crimes
      • Money Laundering is separate from the charges of the underlying crime(s)
  • Money Laundering Stages & Techniques 02/14/12
  •  
  • Trade Based Money laundering 02/14/12
  • We all share the same goals: 02/14/12 @2011 - ICBC Doha Branch
  • Objectives of presentation
    • Why the need to risk assess?
    • How to risk assess?
    • Objectives – V – Risk
    • Input and Output
    • Translating operational requirements into a National Strategy
    • This is not a passive training session!
    02/14/12 @2011 - ICBC Doha Branch
  • 02/14/12 @2011 - ICBC Doha Branch
  • Objectives V Risks
    • Before thinking of risks we need to determine what the operational objectives of our departments are?
      • What we were set up to do?
      • What do we do well?
      • What do we need to do better?
      • What do we need to stop doing?
    • Once we establish objectives then we can think of risks
    02/14/12 @2011 - ICBC Doha Branch
  • The Outline of the Risk-Based Methodology 02/14/12 @2011 - ICBC Doha Branch
  • Risk Categories 02/14/12 @2011 - ICBC Doha Branch Category of Risk Description Corporate / Commercial Risks arising out of entrepreneurial or commercial activities. Economic / Financial / Market Risks driven by economic activity either of a region, jurisdiction or given market. Legal / Regulatory Risks arising from legal or regulatory requirements or evolving international standards. Organisational / Management Human Risks presented due to limitations of human or financial resourcing. Political / Societal Risks arising from changing political or societal expectations. Environmental / Acts of God Risks that can materialise without the ability to influence them. Technical / Operational / Infrastructure Risks caused or exacerbated by resourcing or technical limitations.
  • Examples of Risk Identification 02/14/12 @2011 - ICBC Doha Branch Objective: To travel from Al Rayyan to Doha for a meeting by bus for a meeting at a certain time. Risk Description Evaluation - Good Description? Failure to get from Al Rayyan to Doha on time for the meeting NO, this is simply the converse of the objective Being late and missing the meeting NO, This is a statement of impact of the risk, not the risk itself. There is no food on the bus so I get hungry NO, this does not impact on achievement of the objective. Missing my lift to the bus stop causes me to miss the bus causing me to be late and miss the meeting YES, This is a risk that can be controlled by making sure I allow plenty of time to get to the bus-stop. Severe weather prevents the bus from running and me getting to the meeting YES, although this is a risk which I cannot control, but against which I can make a contingency plan.
  • Addressing Risk - The Risk Matrix 02/14/12 @2011 - ICBC Doha Branch
  • Assessing Risk- Impact & Likelihood
    • All risks need to be assessed for their impact and likelihood;
      • Impact
        • Low – If risk materialised will not have a detrimental effect
        • Medium – Some damage will ensue
        • High – Major remediation will be required to correct
      • Likelihood
        • Low – The risk may occur only in exceptional circumstances
        • Medium – Reasonable chance of occurring
        • High - Most likely to occur than not
    02/14/12 @2011 - ICBC Doha Branch
  • Risk Tolerance Matrix 02/14/12 @2011 - ICBC Doha Branch
  • Risk Tolerance
    • TOLERATE
      • The exposure may be tolerable without any further action being taken
    • TREAT
      • The purpose of treatment is that whilst continuing within the organisation with the activity giving rise to the risk, action (control) is taken constrain the risk to an acceptable level.
    • TRANSFER
      • For some risks the best response may be to transfer them. This option is particularly good for mitigating financial risks or risks to assets.
    • TERMINATE
      • Some risks will only be treatable, or containable to acceptable levels, by terminating the activity.
    02/14/12 @2011 - ICBC Doha Branch
  • We need to balance different demands Review account opening opportunities across business lines Account openings Compliance will give you a timely response so you can respond to potential clients quickly Identify account openings that need to be escalated Optimise risk Build brand Effective use of resources Maximise opportunities Profitability 02/14/12 @2011 - ICBC Doha Branch
  • 02/14/12 @2010 Compliance Alert THE ONLY ISSUE? COMPLIANCE & REGULATORY RISK The problem is KYC KNOW YOUR - CUSTOMERS - CORRESPONDENTS - EMPLOYEES - SHAREHOLDERS ? 02/14/12 @2011 - ICBC Doha Branch
  • Know your customer: why is this needed? What does it mean?
    • Risk based client classification
    • How to carry out customer due diligence
    • Beneficial owners of funds vs introducers
    • Accounts and territories a Bank will not deal with
    • Higher-risk clients
    • - How the information will be verified and for whom, and
    • - The extent of identification information to be sought
    • - Politically Exposed Persons: what it means and why could they be
    • high risk?
    • - Entities with no transparent ownership structure – i.e. FZCs
    02/14/12 @2011 - ICBC Doha Branch
  • Components of a Risk Based Approach Risk Indicators Mitigating Controls Regulatory Environment
    • Customer/Business Type
    • Geography
    • Product/Service/Delivery
    • Channels
    • Transaction Type
    • Governance Structure
    • Policies & Procedures
    • Training/Communications &
    • Awareness
    • Independent Testing
    • Increased regulatory expectations
    • New regulations
    AML Risk Based Approach 02/14/12 @2011 - ICBC Doha Branch
  • Compliance Process 02/14/12 @2010 Compliance Alert 4 Phases Risk assessment Risk identification Risk Reporting Risk Monitoring 02/14/12 @2011 - ICBC Doha Branch
  • Risk Based Approach to KYC 02/14/12
    • 1. Accept or Reject business?
    • Profitability
    • Suitability
    • Reputation Risk
    • Sanctions
    • Suspect blacklists
    Reject due to Business Considerations Reject due to Sanctions etc Accept 2a. Borrowing Customers Existing KYC Process (BCA) 3. Risk Assessment Manage as Level 3 Risk Manage as Level 2 Risk Manage as Level 1 Risk 2b. Non-Borrowing Customers risk profiled using agreed and easy to implement filters. 3. Separate out Level 3 customers using agreed filters. 3. Impose Basic KYC only 3b. Impose Enhanced KYC @2010 Compliance Alert 02/14/12 @2011 - ICBC Doha Branch
  • Risk Based Approach to KYC 02/14/12 Level 3 Risk Level 2 Risk Level 1 Risk Monitor Account Activity which requires account to be classified as Level (2) or (3) Monitoring to identify account activity which requires account to be reclassified as Level (3) Monitoring of transactions against customer profile on monthly basis. Account Opening Ongoing Account Management
    • Monthly Review
    • Monitoring of transactions against customer profile
    • KYC Relationship review approved by Senior management
    • Enhanced KYC
    • Basic KYC Plus
    • Nature of business
    • Origin of funds
    • Purpose of account
    • Type & level of activity
    • Basic KYC
    • Evidence of Identity
    • Evidence of address
    • Sanctions Filtering
    @2011 - ICBC Doha Branch
  • Why should I care about these Requirements?
    • Money Launderers and Terrorists seek out vulnerable banks
    • The Regulator will fine the bank heavily
      • Ignorance is no defense!
    • FinCEN Listing Banks as Primary money laundering concern (LCB Case 10 Feb 2011)
    • OFAC can and will seize customers funds
      • Banco Delta Asia Ltd. Macau, Syria, Cuba, Iran, North Korea, Congo
    • US, European and other banks won’t Correspond with you
      • Strict Due Diligence
      • Correspondent Bank Certifications
      • Demand due diligence (KYCC)
    • The cost of a Fine is insignificant, compared to the internal cost and loss of business .
      • Restructuring, new procedures, new systems, training
      • Loss of reputation
      • Loss of shareholder value
    02/14/12 @2011 - ICBC Doha Branch
  • Watch list Filtering
    • Scanning of customer records & transactions against
      • Government sanction lists – OFAC, BOE, UNO etc
      • High risk individuals- terrorists, organized crime, fraudsters etc
      • Exposed individuals – PEPs, public figures, high profile
      • 3 rd party database providers – World Compliance, Thomson, Bridger, World-Check, Dow Jones-Factiva, Complinet, Lexis-Nexis, etc.,
    • Key Issues
      • Character Variations
      • Phonetic Variations
      • Transliterations & cultural differences
    • Using intelligent name matching algorithms with :
      • Normalization of names – capitals, abbreviations, spaces, punctuation
      • Reference libraries – common short names, cultural inputs
      • Reduction to simplified representation – phonetics, soundex
      • Indexing – decision tree
      • Similarity assessment – string equality, sub-sets, edit distance
    02/14/12 @2011 - ICBC Doha Branch
  • 02/14/12 @2011 - ICBC Doha Branch The Situation k
      • High risk individuals, companies and organisations are targeting financial organisations and the countries within which they operate.
      • Their very existence depends on their ability to enter your organisation or country undetected. What are the risks:
      • Regulatory risk
      • Reputational risk
      • Business risk
      • Shareholder risk
      • Job risk
  • 02/14/12 @2011 - ICBC Doha Branch LOB Risk Assessment Evaluate Assess Evaluate inherent risks Assess controls Determine Develop Monitor and enhance controls Develop and implement action plans Determine residual risk/ establish thresholds Maintain and retain records Monitor Maintain
  • Risk-based Approach and the KYC Process
    • Simplified Due Diligence?
    • Enhanced Due Diligence?
    02/14/12 @2011 - ICBC Doha Branch Risk-Scoring
      • How do we perform risk assessment?
      • Do we have the right tools to do the job?
      • How does the risk assessment program define and score the risks of products? Customers? And jurisdictions?
      • How do we develop risk based matrices? With or without the help of outside vendors?
    Risk-based Approach and the KYC Process 02/14/12 @2011 - ICBC Doha Branch
  • Know Your Customer
    • ICBC is committed to know each of its customers to the extent appropriate for the customer’s risk profile
    • ICBC Customer Due Diligence Measures
      • Customer identification
      • Verifying the customers ID, reliable, independent source documents, data and information
      • Establishing whether customer acting on behalf of another person
      • Measures if customer acting on behalf of another person
      • Measures if customer is a legal person or legal arrangement
      • Establishing beneficial ownership
      • Obtaining the source of customer’s wealth and funds
      • Obtaining information about the purpose and intended nature of the business relationship
    02/14/12 @2011 - ICBC Doha Branch
  • 02/14/12 @2011 - ICBC Doha Branch Enhanced Risk Assessment Methodology Conduct detailed analysis of each category 1 2 5 3 4 Assess Risk Continuous Monitoring Purpose of Account Activity in Account Nature of the business Location Products and Services used
  • Risk-based Approach and the KYC Process
    • Simplified or Enhanced Due Diligence?
    • Simplified CDD Level 1 - Tick-box / Red-Flag Check
    • Limited CDD Level 2 - Public Record Research
    • Standard CDD Level 3 - Public Record Research Limited Source Enquiries
    • Enhanced CDD Level 4 - In-depth Public Record Research & Enquiries Specific issues
    • The Risk-based approach requires a levelled approach to CDD
    02/14/12 @2011 - ICBC Doha Branch
  • Main AML Risk based Approach Factors 02/14/12 @2011 - ICBC Doha Branch Customer Risk Country Risk Sector Risk Product Risk
  • Risk Based Approach Elements 02/14/12 @2011 - ICBC Doha Branch
    • Customer Risk
    • Overall background and reputation
    • Business interests and practices- Mgt
    • Business associates and
    • networks/ Business Link
    • Political Affiliations ( PEPs )
    • Beneficial ownership and control
    • Source of funds
    • Country Risk
    • Political stability
    • Legal status
    • Economic situation
    • Standing of the financial services
    • industry
    • Exposure to organised crime and
    • Money laundering
    • Corruption
    • Sector Risk
    • Weapons and Metal trading
    • Precious metals
    • Art
    • Real Estate
    • Exchange Dealership
    • Product Risk
    • Private Banking
    • Correspondent Banking
    • Structured Finance
    • Commodities
  • RBA Matrix
    • An RBA Matrix is built to:
      • Assess Risks
      • Capture identified risks
      • Estimate their probability of occurrence and impact
      • Rank the risks based on the above information.
    02/14/12 @2011 - ICBC Doha Branch
    • These variables may increase or decrease the risk posed by a particular customer or transaction, for example:
          • The level of regulation or governance regime to which a customer is subject. (A customer is located in a high regulated jurisdiction poses less risk than a customer located in a low risk jurisdiction)
          • Type of the entity: publicly owned entities pose less risk than private entities
          • The use of intermediate = Anonymity
    02/14/12 @2011 - ICBC Doha Branch
  • Case Study – Results of Risk-Scoring 02/14/12 @2011 - ICBC Doha Branch
    • Customer Risk
    • Overall background and
    • reputation
    • Business interests and practices
    • Business associates and
    • networks
    • Political Affiliations (PEPs)
    • Beneficial ownership and control
    • Source of funds
    • Country Risk
    • Known of weak AML rules
    • Known of terrorist financing,
    • Smuggling & other money
    • laundering activities
    • Sector Risk
    • Real Estate
    • Product Risk
    • Structured Finance
    • Complex transaction
  • Case Study – Results of Risk-Scoring
    • Enhanced CDD – Level 4
    • Simplified CDD Level 1 - Tick-box / Red-Flag Check
    • Limited CDD Level 2 - Public Record Research
    • Standard CDD Level 3 - Public Record Research Limited Source Enquiries
    • Enhanced CDD Level 4 - In-depth Public Record Research & Enquiries Specific issues
    • The Risk-based approach requires a levelled approach to CDD
    02/14/12 @2011 - ICBC Doha Branch
  • 02/14/12 @2010 Compliance Alert Actions Impact Analysis Risk Response (controls) Quality of Risk Customer Risk Geographic Risk Product and Service Risk Quantity of Risk Response Effectiveness Analysis Identify Risk Categories Assess Quantity of Risk Assess Quality of Risk Action Plans Enhanced Risk Assessment Methodology Identify specific risks categories 02/14/12 @2011 - ICBC Doha Branch
  • Customer Risk Matrix 02/14/12 @2011 - ICBC Doha Branch Products/Services Used Customer Type Deposit Account Unsecured Loan/Credit Cards Wire Transfer Private Banking Trust Services PEP Moderate Moderate High Highest Highest High Net Worth Moderate Moderate High Highest Highest High Risk Nationality Moderate Moderate High High High High Risk Industry Moderate Moderate Moderate Moderate Moderate Cash Intensive Business Normal Moderate High Moderate Moderate Salaried Employee Normal Normal Normal Normal Normal Independent Consultant/Individual Entrepreneur Moderate Normal Normal Normal Normal Unemployed Moderate Moderate Moderate Moderate Moderate Charity Moderate High High High High
  • Account Opening Policies 02/14/12 @2011 - ICBC Doha Branch Customer Risk Rating Applicable Policies Normal
    • Presentation of valid original identity documents
    • Establish purpose of account
    • Establish source of funds
    • Retain copies
    • Check against UN and other watch lists
    Moderate
    • Above plus …
    • Send registered letter to customer at provided address. Retain signed return receipt.
    High
    • Above plus …
    • Independent verification of account opening documents
    • Verification of source of funds
    • Interview with bank officer
    • Visit by bank officer to customer home/business
    • Approval from branch manager
    • Updating of account information/documents every twelve months
    Highest
    • Above plus …
    • Updating of account documents every six months
    • Approval from CEO
  • Transaction Type Risk Matrix 02/14/12 @2011 - ICBC Doha Branch Customer Risk Rating Offshore Wire Transfer Wire Transfer to High Risk Jurisdiction Cash deposit under threshold/structuring transactions Large Cash Deposit Forex Early Loan Repayment Normal Standard Standard Standard Enhanced Standard Standard Moderate Enhanced Enhanced Enhanced Enhanced Enhanced Enhanced High Severe Severe Enhanced Enhanced Enhanced Enhanced Highest Severe Severe Severe Enhanced Enhanced Enhanced
  • Transaction Execution/Monitoring Policy 02/14/12 @2011 - ICBC Doha Branch Transaction Risk Rating Applicable Policies Standard
    • Teller/staff monitoring
    • Automated system monitoring
    Enhanced
    • Customer explanation for transaction
    • Compliance Officer Approval for execution
    Severe
    • CEO Approval for execution
  • 02/14/12 @2011 - ICBC Doha Branch
    • Overview
    © January 2003, kd labs ag , analytical CRM and data mining 02/14/12 @2011 - ICBC Doha Branch Data analysis 1 2 patterns 3 Self-history Peer groups Link Analysis rules experts, regulations names Blacklists, PEP‘s, etc. Bank's transactions & customers data ! Alert delivery Admin Client User Interfaces Workflow Client data repository external data
  • 02/14/12 @2010 Compliance Alert Risk: Customer/Business Type Identifying PEPs
    • How do you determine whether an account holder is a PEP?
    • Seek information directly from the individual
    • Review sources of income including past and present employment history
    • and references form professional associates
    • Review public sources of information (i.e. databases, newspapers, etc.)
      • CIAs online directory of “Chiefs of State and Cabinet Members of Foreign
      • Governments” http://www.odci.gov/cia/publications/chiefs/index.html
      • Transparency International Corruption Perceptions Index
      • Private vendors (i.e. world Compliance/ Regulatory DataCorp (RDC),
      • Factiva, and WorldCompliance)
    02/14/12 @2011 - ICBC Doha Branch
  • 02/14/12 @2010 Compliance Alert Risk: Customer/Business Type Identifying PEPs (Cont.)
    • FATF Recommendations for PEPs:
    • Determine whether a customer is a PEP
    • Obtain senior management approval for establishing relationship
    • Establish source of wealth of funds
    • Conduct ongoing monitoring of relationship
    02/14/12 @2011 - ICBC Doha Branch
  • Assessing AML Risk by Jurisdiction International Cooperation e.g OECD, UN Non-Cooperation status RISK 02/14/12 @2011 - ICBC Doha Branch Corruption Sanctions Black list status e.g tax haven
  • 02/14/12 @2011 - ICBC Doha Branch Case Study: The United Nations A FAMILY-RUN BUSINESS
  • 02/14/12 @2011 - ICBC Doha Branch
    • Son of Kofi Annan (Secretary General-UN) from first marriage
    Kofi Annan Case Study: The United Nations
    • Worked for SGS/Cotecna (given UN deal to enforce sanctions in Iraqi ports)
    • Moved on to start own company, Sutton Investments
    • Consortium won bid valued in $100s of millions to build Zimbabwe airport
    Kojo Annan Leo Mugabe
    • Sutton part of consortium with Air Harbour Technologies & Leo Mugabe (nephew of Robert Mugabe, Pres of Zimbabwe)
    Hani Yamani
    • Air Harbour owned by Hani Yamani (son of Sheikh Yamani, Saudi Oil Min.)
    Kojo Amoo
    • Kojo Amoo-Gottfried, Ghana Ambassador to UN (nephew of Kofi )
  • Test your AML Knowledge 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: Which of the following is the most common method of laundering money through a legal money services business? A. Purchasing structured money instruments B. Smuggling bulk-cash C. Transferring funds through Payable Through accounts (PTAs) D. Exchanging Colombian pesos on the black market Correct Answer is: A 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: In general, the three phases of money laundering are said to be: Placement A. Structuring and manipulation B. Layering and integration C. Layering and smurfing D. Integration and infiltration Correct Answer is: B 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: Which of the following is an indication of possible money laundering in an insurance industry scenario? A . Insurance products sold through intermediaries, agents or brokers B . Single-premium insurance bonds, redeemed at a discount C . Policyholders who are unconcerned about penalties for early cancellation D . Policyholders who make full use of the “free look” period Correct Answer is: C 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: Upon receipt of a legal document where the financial institution is asked by a government authority to produce account information and records, what is the recommended first step for the institution? A . Review the legal document and answer the authorities within 72 hours. B. Research all the account information within the institution on the account holder. C . File a suspicious activity report, if possible. D . Contact the institution’s Compliance Officer or legal counsel. Correct Answer is: D 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: Money Laundering refers to A . Transfer of assets/cash from one account to another B . Conversion of illegal money through banking channels C . Conversion of cash into gold for hoarding D . Conversion of assets into cash to avoid income tax Correct Answer is: B 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: Minimum retention period of the records according to Jammal Trust Bank that can be produced to the relevant Regulatory Authority in case of suspicious transactions is A . 5years B . 7 years C .10 years D .15 years Correct Answer is: A 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: The following can be called as suspicious transactions A . Customer insisting on anonymity. B. Work address difference from place of residency. C . Unusual terminating of account and refunds of interest D . All of the above Correct Answer is: D 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: Which of the following documents can be accepted as proof of customer identification. A . Electricity bill B . Salary slip C . Gym Membership D . Government Issued Photo ID Correct Answer is: D 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: Salaried employees, Government departments are classified as A . High Risk B . Low Risk C . Medium Risk D . No Risk Correct Answer is: B 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: PEPs (Politically Exposed Persons) & High Net Worth individuals could be classified as A . High Risk B . Low Risk C . Medium Risk D . No Risk Correct Answer is: A 02/14/12 @2011 - ICBC Doha Branch
  • Knowledge Test Q: What are the money laundering risks to organizations? A . Reputation Risk B . Compliance Risk C . Operational Risk D . Legal Risk Correct Answer is: A 02/14/12 @2011 - ICBC Doha Branch
  • 02/14/12 @2011 - ICBC Doha Branch
    • OFAC: Office of Foreign Assets & Control lists:
            • Specially Designated Nationals
            • Weapons of Mass Destruction
            • Blocked Countries
    • BIS: Bureau of Industry & Security - Issued by the United States
    • BOE: Bank of England
    • CSSF: Commission de Surveillance du Secteur Financier-Luxembourg
    • SECO: Secretariat d’Etat a l’economie – Switzerland
    • UN: United Nations: Al-Qaida & Taliban; Iraq; Liberia
    • MAS: Monetary Authority of Singapore
    • EU: EU Regulations
    • FATF: Financial Action Task Force
    • Other: Vendor (i.e. SIDE-OFAC/World Check Lists) and internal Lists
    Risk: Customer/Business Type Examples of Black Lists
  • 02/14/12 @2010 Compliance Alert Best Practices Framework 02/14/12 @2011 - ICBC Doha Branch Risk-Based Customer Due Diligence Investigations & Reporting Customer Transactions Single Customer View Data Independent Audit Training/Self Testing Written Procedures AML Risk Assessment Risk Profile Project Planning/Execution Policies Corporate Governance Program Management
  • Summary
      • Risk-scoring defines the level of CDD required
      • Beneficial Ownership and PEPs are key
      • Advantages:
        • Institutions can mitigate their own risk exposure through the risk-based approach and risk exposure
        • Risk-Scoring also enables institutions to develop benchmarks and risk rating parameters
    02/14/12 @2011 - ICBC Doha Branch
  • Primary objective is profit maximisation but we place high importance on client care & other aspects of compliance. There are multiple assurances of this in the firm……. 02/14/12 @2011 - ICBC Doha Branch
  • 02/14/12 @2011 - ICBC Doha Branch THANK YOU