5. The consequences of non-compliance are serious … City banks ‘handled dictator’s fortune’. This is disappointing says regulator Financial Times 9/3/01 Crime bill cracks down on money laundering The offence of failing to report evidence of money laundering will be toughened Financial Times 6/3/01 Bank of Scotland .. under investigation by the Isle of Man's financial regulator after being sucked into a web of alleged money laundering and bankruptcy fraud Financial Times 10/12/00 Credit Suisse.. to be indicted in the money-laundering scandal over $4bn plundered from Nigeria by General Sani Abacha, the country's former leader Financial Times 7/12/00 UK signs UN convention on trans-national organised crime…. establish a common legal framework and introduce measures across Europe to … crack down on money laundering… Financial Times 14/12/00 The designated president of the Financial Action Task Force , Jochen Sanio, said the agency will need a bigger budget and tough powers to impose sanctions on countries that don't comply with its rulings ' Everything will be overshadowed by the task of fighting terrorism' Financial Times 3 October 2001 Paine Webber International (UK Limited) fined £350,000 for serious compliance failures, including inadequate controls to prevent money laundering Complinet 22/08/01 Source: KPMG Presentation March 27, 2003 INTRODUCTION
6. Minimum Requirement Standards (Seeking extensive legal advice & mapping the requirement with Law ) Policy ( Development of a common compliance policy that provides for transparent and, consistent AML compliance procedures ) Procedure (Development of an implementation strategy and a corresponding time bound plan; explaining how the policy will be implemented and the controls that need to be in place to implement the policy and provide assurance evidence) Processes (Controls added to processes to implement the policy (if such controls do not already exist). Assessment checks made to specific Key Controls to evidence that they are being undertaken and therefore that provide assurance that the policy is being followed) Implementation of the Regime “ Covered Institutions” STRATEGY THE MOST CRITICAL STAGE OF THE STRATEGY IS……
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9. SUMMARY EXEMPLARY GOVERNANCE CONTROL STRUCTURE INFORMATION & COMMUNICATION MONITORING PROJECT MANAGEMENT TEAM Develop time bound implementation Plan Board of Directors (BOD) & Senior Management (SM) overall responsibility Appointment of Central Project Management Team BOD and SM responsibility for promoting awareness & culture building Monitor plan till transition into Building Up mode Set up appropriate control structure Ensure appropriate segregation of duties Ensure adequate and comprehensive data Establish effective channels of communication Ensure appropriate Technological Support in place Continually monitor internal controls Effective and comprehensive internal audit of internal control system Report on identified internal control deficiencies
Banks in India can no longer afford to take a lenient approach towards ‘Know Your Customer’ (KYC) norms and there is a strong need to strengthen AML measures to support effective implementation of the Law. A well-functioning AML regime involves the effective discharge of responsibilities by a wide range of parties—e.g., reporting of covered and suspicious transaction by covered Institutions, monitoring and analysis of transaction reports and related information by the FIU, investigation and prosecution by law enforcement agencies, and adjudication of cases by the courts. Appropriate coordination and cooperation among parties are likewise crucial to effective implementation of the regime.
Apart from risks of fraud, they are subjected to regulatory penalties that could extend beyond fines. The actions stipulated by RBI against banks indicted in the recent IPO scam emphasize the need for strengthening KYC and AML policies and processes in banks. Putting in place an effective AML and KYC framework is also required for cross-border correspondent banking relationships.
While it will inevitably add costs to the business, fostering and policing compliance alone is unlikely to secure any business advantage. Experience has shown us that an AML strategy that is integrated into the entire value chain is essential, to monitor and enforce regulatory compliance, to be operationally effective, and to become, and remain, ‘in control’. Such a strategy needs to establish a watertight organizational structure and facilitate the required operational improvements while also accommodating any training and cultural development required.
Technological Support is needed to deter money laundering and predicate crimes for strengthening the institutional framework for AML. Although AML technology forms one of a number of components in an overall AML solution, good technology will equip organizations with an improved level of defence in the fight against financial crime risk, by providing: • Transaction monitoring – scanning and analysing data for potential money laundering activity; • Watch list filtering – screening new accounts, existing customers, beneficiaries and transaction counterparties against terrorist, criminal and other blocked-persons watch lists; • Automation of regulatory reporting, filing of suspicious activity reports (SARs), currency transaction reports (CTRs), or other regulatory reports with the government; and • A detailed audit trail to demonstrate compliance efforts to regulators, as well as respond to subpoenas and other requests. However, with the right strategy in place, financial institutions can turn their AML compliance systems into robust surveillance and identification systems that may deliver benefits beyond AML regulatory demands.
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