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International aml standards qatar case [compatibility mode]


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Presentation by Bachir El Nakib at The International Conference on:
Combating Money Laundering and Terrorist Financing"(AML/CFT)
27th – 28th of April 2011, Coral Beach Hotel, Beirut – Lebanon

Published in: Economy & Finance
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International aml standards qatar case [compatibility mode]

  1. 1. Strengthening the inter-relationship between theregulators and the financial institutions to mitigate chance h of discrepancies Bachir El Nakib Head of Compliance / MLRO Industrial and Commercial BankAl-Abed Hussam of China , Doha (QFC) Branch ( ) 1
  2. 2. Why regulate financial & non-financial sector?• Financial Markets are large and important• Financial stability is crucial to the well-being of a modern economy• Investors may need protection from the risks posed by complex financial products p• Therefore… Regulator = Trust
  3. 3. Regulator’s Vs Financial Sector main goals The main Regulator’s aim is to create successful circumstances for the financial sector:1. - efficient - - profitable / fit bl /good services d i - - more valuable money - - extended access to affordable services √ R Regulated Firms have similar goals l t d Fi h i il l √ This creates a strong shared interest, despite inevitable tensions.
  4. 4. Regulator – Regulation and Regulated Companies• Regulation can be either friend or foe to the main operating company or companies.• Company and regulator have a common interest in the success of the sector.• The best basis for this is successful main operators are: competitive/profitable/innovative. competitive/profitable/innovative• However the regulator needs to enable effective competition to develop.• Successful resolution of this tension depends on an effective working relationship.
  5. 5. Building an effective relationship between regulators and regulated companiesMain elements: - Active management (on both sides) - Practical arrangements, e.g. interconnection - Provision of full information - Arrangements to ensure compliance - Straightforward approach to enforcement
  6. 6. International Standards Key considerations Regulators Vs Financial Sector• MENAFATF Mutual Evaluation• FATF HRJ Listings g (Feb 2010 – Feb 2011)• Qatar Remediation Efforts• MLRO Implementation 6
  7. 7. MENAFATF Evaluations.docx
  8. 8. Background: Undertake a self-assessment or gap analysis • AML/CFT Self Assessment Template – A tool to assist firms in determining the effectiveness of its AML/CFT policies and procedures. – Not a checklist, not a Yes/No exercise. – Detailed description on how the firm meets the requirement is expected – Assess & document the firm AML/CFT & fraud prevention programme against each core requirement – A list of points that Firms should consider when assessing itself against each requirement is provided – Rate its level of compliance: High, Medium, Low – AML Self Assessment.docxQatar Financial Centre Regulatory Authority 8
  9. 9. Qatar New AML/CFT Law (4) of 2010Background: g1. Cooperation with IMF and NAMLC Workshop February- March 2010 100125 Letter from FIU.pdf p M.Lesser.docx1.1 Qatar listed by FATF as HRJ on 18 February 2010 after identification of deficiencies in Qatar’s previous AML/CFT legal framework (2002)2. The new Law (4) came to light 18 March 2010 to protect Qatar from money laundering (ML) and the financing of terrorism (FT)
  10. 10. Law No. 4 of 2010 on Anti- Money QFC Regulatory Authority AML /Laundering and Combating the CFT Rules 2010Financing of TerrorismQatar Central Bank Guidelines of 2010 on Qatar Financial Markets Guidelines of 2010AntiAnti- Money Laundering and Combating the on Anti- Money Laundering and Combating y g gFinancing of Terrorism the Financing of Terrorism• Aligned to Law No. 4 of 2010 on Anti- Money Laundering and Combating the Financing of Terrorism• Ensure optimum compliance with FATF Recommendations and standards
  11. 11. Background to the new AML/CFT Rules• close alignment with the FATF Recommendations and standards through the use of key FATF terms and terminology;• the rules set out a clear senior management responsibility for AML/CFT responsibilities and the development of an AML/CFT / p p / programme;• more sophisticated risk-based approach to addressing firms AML/CFT risks; and• a single set of rules designed and structured to closely align with how a firm would undertake the development and implementation of an AML/CFT program and the ongoing compliance with AML/CFT regulatory requirements.
  12. 12. Qatar New AML/CFT Law (4) of 2010Background: g 4. QFCRA New Rulebook published 30/04/2010, revised 01/10/20105. New framework in line with Financial Action Task Force (FATF) international standards6. In October 2010, the FATF publicly welcomed the significant progress in improving the AML/ CFT regimes in Qatar and noted that its jurisdictions met their commitments in their action plans regarding the strategic AML/CFT deficiencies that the FATF had identified in February 2010.(QNA) FATF Public Statement & Imploving Global AML (1).doc
  13. 13. Overview of the AML/CFT Law10 Sections 1. Definitions 2. ML and FT Offences 3. Disclosure system at customs 4. National Anti-Money Laundering Committee (NAMLC) 5. Qatar Financial Information Unit (QFIU) and Suspicious Transaction Reporting (STR) System 6. Preventive Measures 7. Supervisory Authorities 8. Investigative Procedures and Provisional Measures 9. International Cooperation 10. Sanctions
  14. 14. Overview of the AML/CFT LawKey Definitions include:1. Proceeds of Crime - Any funds derived or obtained, directly or indirectly, from one of the predicate crimes listed in Article 2 (all felonies, international conventions, list of proceeds generating crimes e.g. fraud, theft, smuggling )2. Funds - Assets or properties of every kind3. Money Laundering –4. Financing of terrorism -5. Financial Institution (FI)– 14 categories6. Designated Non Financial Businesses & Professions (DNFBPs) – real estate agents, jewelers, lawyers, accountants, trust and company service providers
  15. 15. Key AML/CFT principles in QatarThe 6 key AML/CFT principles cover the following areas:Principle 1 – senior management responsibility;Principle 2 – risk-based approach;Principle 3 – know your customer;Principle p 4 – effective reporting; p gPrinciple 5 – high standard screening and appropriate training; andPrinciple 6 – evidence of compliance.
  16. 16. Principle 6– evidence of compliance• Principle 6 (Rule 1.2.6) requires a firm to be able to provide documentary evidence of its compliance with the requirements of the AML/CFT Law and the Rules.
  17. 17. “Dear CEO” letters Compliance confirmation letters from Firms on or before September 15th stating that the Firm has undertaken the following:  Review of Policies, Procedures, Systems and Controls  Development & implementation of the risk-based approach  Review customers files  Enhancement of AML/CFT compliance culture  Training to relevant staff  Independent Review of the AML framework The letter should confirm whether or not the Firm is in compliance with the new AML/CTF Rules 2010 of the QFC Regulatory Authority. Areas of non-compliance + related remediation plan  to be shared with the Regulatory Authority 17
  18. 18. Who’s regulated by….. FIU Regulator FirmCompliance Facing Customer CEO Finance Officer MLRO Function F ti 18 © 2010 Compliance Alert
  19. 19. Approved Individuals – Controlled FunctionsControlled Functions Executive & Non-Executive Governance Function Non Executive Mandatory1 Senior Executive Function Mandatory2 Compliance Oversight Function Mandatory Money Laundering Reporting Function Mandatory3 Finance Function y Mandatory Risk Management Function Mandatory4 Actuarial Function Mandatory5 Senior Management Function Customer Facing Function Mandatory61 Mandatory for subsidiaries only2 For subsidiaries the individual must be resident in Qatar3 Must be resident in Qatar4 Mandatory for Insurers only y y5 Mandatory for all Life Insurers and some General Insurers6 Mandatory for firms conducting Investment Business and Insurance Mediation Business19
  20. 20. Authorisation Criteria – Approved Individuals Details of the firm’s assessment of the individual’s competence to perform the  proposed Controlled Function. proposed Controlled Function Career history for last 7 years (preferably provided with a copy of the individual’s  CV) and explanations given for any gaps of longer than 6 months. Other regulatory registrations – past and present. Educational and professional qualifications that are relevant to the Controlled  Function to be carried out. Function to be carried out Fitness and propriety questionnaire. In summary to be considered fit and proper individuals must have the relevant In summary, to be considered fit and proper, individuals must have the relevant  background, experience, education and skills to carry out their proposed function  competently.  Included in our assessment of skills is the individual’s personality and  character. This is particularly important for roles such as the Compliance Oversight  Function and Money Laundering Reporting Function. Function and Money Laundering Reporting Function20
  21. 21. Enforcement remedies• Impose or vary conditions restrictions etc on an Authorisation or Impose or vary conditions, restrictions etc on an Authorisation or  Approval  [FSR Art 31(2) (A)]• Withdraw an Authorisation/Approval or remove a Regulated Activity from  a firm s Authorisation  [Art 31(2)(C)] a firm’s Authorisation [Art 31(2)(C)]• Public censure [Art 58]• Financial penalty [Art 59]• Appointment of manager [Art 60] i f [ 60]• Enforceable undertakings [Art 61]• Directions power – prohibitions and/or requirements [Art 62]• Injunctive relief [Art 63/64]Qatar Financial Centre 21Regulatory Authority
  22. 22. Annual MLRO Reporting•Division 2.3C of the AML/CFT Rules of 2010 Division•What are the requirements? •Reporting by MLRO to senior management p g y g •Minimum - annual reporting •Must assess the adequacy and effectiveness of the firms AML/CFT policies, procedures, systems and controls in preventing ML/TF •Rule 2.3.8(3)(a-k) prescriptive on the minimum areas to report on 22
  23. 23. Annual MLRO Reporting• Consideration of the MLRO report• What must senior management do? • Consider each report made to it by the MLRO p y • If deficiencies are identified – approve an action plan to remedy • Reports must be given to senior management in sufficient time to allow senior management to deal with the report • Reporting cycle must be completed not later than 4 months after the firms financial year ends 23
  24. 24. Annual MLRO Report Template.docx l O l dAdequacy and effectiveness - AML/CFTR 2.3.8 (2)1. The report must assess the adequacy and effectiveness of the Firm’s AML/CFT policies, procedures, systems and controls in preventing money laundering and terrorist financing.The AML/CFT policies procedures systems and controls are: policies, procedures,Adequate Partially adequate Not adequate Not assessed yetComments: (How the adequacy assessment was conducted, areas of inadequacy…)The AML/CFT policies, procedures, systems and controls are:Effective Partially effective Not effective Not assessed yetComments: (How the effectiveness was assessed, areas of ineffectiveness…) 24
  25. 25. Saudis form agency against money laundering and terror financing (Gulf News 28.03.11)• Riyadh: Saudi Justice Minister Dr Mohammad Al Essa issued a decision on Saturday stipulating the establishment of a department to combat money laundering and terror financing financing.• The creation of the new department comes within the framework of the activation of the ministrys role for the execution of a money laundering act issued eight years agoago.• The decision coincides with the release of an international report placing Saudi Arabia in an advanced ranking among the G20 countries in terms of fighting money laundering and terror financing financing.
  26. 26. DFSA censures Saxo Bank Dubai Limited• Administrative Censure Saxo Bank Dubai Limited March 2011.pdf
  27. 27. UAE banks detect 479 laundering cases Q1 - 2011• UAE banks detected 479 money laundering cases in the first quarter of 2011 and reported them to the concerned authorities and officials said the high number indicated better surveillance and business upturn in the country.• Central bank figures showed the total suspicious money laundering and terror funding cases stood at 572 in the first quarter of this year, most of which were detected and report by the countrys 23 national banks and 28 foreign units.• The figures showed 68 cases were reported by money exchange shops and the rest by insurance and other companies operating in the UAE.• Speaking to reporters on Thursday, a senior anti-laundering official at the central b k said a record hi h number of 2 711 l t l bank id d high b f 2,711 laundering cases were d i reported in 2010, an increase of nearly 55 per cent of 2009, when they stood at 1,750. ttp // a ya co /sto y c /s d 0 0 30 59/U a s_ Detect_479_Laundering_Cases
  28. 28. Qatar Financial Centre 2010 DecisionsOn 05/05/2010 QFCRA imposes substantial Fine $506,000 on AL MAL  BANK (Qatar) and withdraw Licence, due:(i) Failing to keep proper accounting records that were appropriate to its  business and that disclosed with reasonable accuracy its financial  y position; (ii) Failing to take adequate steps to ensure that its systems, resources,  p procedures and controls were at all times appropriate to its business;   pp p ;(iii) Failing to establish appropriate internal management and  organisational structures, policies and procedures; (iv) Failing to maintain a register of members and other documentation (iv) Failing to maintain a register of members and other documentation required under the QFC Companies Regulations;  (v) Failing to establish an effective and independent compliance function;  28
  29. 29. Qatar Financial Centre 2010 Decisions 05/05/2010 QFCRA imposes substantial Fine $506,000 on AL MAL  BANK (Qatar) and withdraw Licence, due: (vi) Failing to establish and operate effectively internal reporting  mechanisms including arrangements to identify, measure, manage  and control regulatory  risks;  and control regulatory risks; (vii) Failing to maintain a Share Register or to issue Share Certificates for  each share allotted or transferred; (viii) Failing to provide accurate information to the Regulatory Authority  ( iii) F ili t id t i f ti t th R l t A th it regarding its controllers;  (ix) Failing to ensure that the client funds were segregated from the Bank’s  own funds and by paying the client money into an account that was  f d db i th li t i t t th t not disclosed in the books and records of the Bank; and  (x) Failing to ensure that its entire business operations were conducted in  accordance with Shari’a © 2010 Compliance Alert 29
  30. 30. Is Too Much Compliance A Bad Thing?