Adamas Compliance and Anti Moneylaundering

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Compliance and Anti Money Laundering in the
Current Regulatory Climate
2017

Contents:
1. Current Environment
2. Specific challenges for financial institutions:
1. Heavily regulated
2. Lightly regulated
3. Client specific challenges:
1. Domestic clients
2. Foreign clients
4. Compliance solutions
1. Compliance Fintech
2. Correct risk calculation
3. Correct methodology
4. Correct Training

Current Environment
- Increasing governmental vigilance in fight against money laundering
- Funding of terrorist activity
- Human trafficking
- Drug related money laundering
- Tax evasion
- Increasing regulatory vigilance in fight against money laundering
- Execution of government policy
- Increased risk for financial institutions
- Current and future activity
- Past activity
- Personal liability for Compliance Personnel

Current Environment – IMF Calculation of Global Money Laundering through Banks
1500
1000
Wittingly Unwittingly
1000
2000
1000
500
2000 2005 2011
1250
3250
2016

Current Environment
- Increasing regulation leads to increased complexity of Money Laundering schemes
- Early recognition vital
- The longer money is being laundered, the more difficult to spot

Challenges
- Lack of coherent and universal definition of money laundering
- Mixed definition of terrorism
- Classification of Tax evasion as money laundering
- Lack of global compliance and anti money laundering regulations
- Responsibility left with individual financial institutions
- Underprepared compliance departments
- Lack of use of Compliance FinTech
- Lack of proper Procedures and methodology
- Lack of training

Result
- Incorrect risk calculation
- Turn away the wrong business due to incorrect risk calculation
- Accept the wrong business for the same reason
- Incorrect documentary requirements
- Take time and lose client confidence
- Increased risk
- Reduced revenues
- Inefficient procedures
- Increased costs
BUSINESS RISKLOST BUSINESS
TOO CAUTIOUS INCORRECT RISK CALCULATION

Heavily Regulated Environments
- Normally large institutions in OECD jurisdictions or branches of the same
- Germany
- US
- UK
- Switzerland
- Large balance sheets allow for increased budget to prevent money laundering
- Normally have trained international staff
- Normally have methodology in place
- More aggressive posture regarding risk

Lightly Regulated Environments
- Smaller institutions in non-OECD jurisdictions or branches of the same
- Smaller balance sheets do not allow for increased budget to prevent money
laundering
- Do not normally have trained international staff
- Do not normally have methodology in place
- Perception that can be more easily manipulated
- Defensive posture regarding risk

Domestic Clients
- Compliance officers and MLROs normally more comfortable with domestic clients
- Risk is better known and same culture
- Risk can be better calculated and identified
- Resident account holders more easily accessed and due diligence carried out
- Lower profitability due to fee competition
- More competition in domestic market compared to international
- Only aim is to increase market share against domestic competitors

International Clients
- Compliance officers and MLROs normally less comfortable with international clients
- Risk is less known
- Risk more difficult to calculate and identify
- Non-Resident account holders less easily accessed
- Higher profitability
- Less competition
- Bring new assets to the jurisdiction

Compliance FinTech
- Increasing amount of FinTech and RegTech support helps identify risk factors
- Tailored, risk-based screening for real-time global Sanctions and Warnings, PEPs
and Adverse Media
- Maintain a clear audit trail of user activity and decisions
- Reduction of time consuming manual work
- Research Portals for Enhanced Due Diligence investigations into Customer &
Third Party risk
- AML Transaction Screening (Sender, Beneficiary, Bank, Reference Text, etc.)
- Corporate Registry and Beneficial Ownership checks for businesses
- Fraud Monitoring for Onboarding and Payments risk using custom fraud matrices
- Cannot replace compliance officers and human decision-making

Correct Risk Calculation
- All risk can be controlled and remedial procedures put in place if correctly calculated
- Client risk
- Fraud risk
- Counterparty risk
- Balance sheet risk
- Legal risk
- Regulatory risk
- Reputational risk
- Objective risk calculation analyzing data , not subjective
- Correct calculation ensures good business is not turned away
- Ensures wrong business is identified early

Correct Methodology
- Standard set of internationally-recognised procedures need to be put in place
- Use of international standards ensure legal protection if cases emerge in the future
- Less provisioning and unexpected costs
- Easier to defend robust procedures

Correct Training
- Lack of internationally trained compliance officers leads to incorrect decisions
- Based on ethnicity
- Based on business segment
- Based on human subjective factors
- Correct training to international standards offers long term protection
- Correct training in recognizing most used money laundering schemes
- Early identification of money laundering key, during the placement phase
PLACEMENT LAYERING INTEGRATION

Correct Sequence
FINTECH/REG
TECH
ANALYSIS
HUMAN
ASSESSMENT

Adamas Services
- Compliance audit
- Current arrangements
- Past practices
- Individual trasnsactions
- Individual relationships
- Compliance consultancy
- Fintech/RegTech recommendation and selection
- 3rd Party Compliance and Due Diligence
- Training of Compliance and Anti Money Laundering Teams

Adamas Advisors
Plaça Guillemo 3
AD500 Andorra la Vella
Andorra
Info@adamasadvisors.com

Adamas Compliance and Anti Moneylaundering

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