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AML Sanctions Presentation

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AML Sanctions Presentation

  1. 1. Trade and Financial Sanctions - Global Issues with Local Implications: Are You Exposed?Copyright Notice: These materials are protected by CANADIAN copyright law and may not be reproduced, distributed, transmitted, displayed, or otherwise published without the prior written permission of Williams McGuire AML Inc.. You may not alter or remove any trademark, copyright or other noticeDisclaimer: The contents of this DOCUMENT include information relating to general PRINCIPLES AND should not be construed as specific instructions OR ADVICE. IT IS not a substitute for legal and other professional advice. If any READER requires legal advice or other professional assistance, each such READER should always consult his or her own legal or other professional advisors and discuss the facts and circumstances that apply to the READER. <br /> www.amlcompliance.ca<br /> July 2011<br />
  2. 2. What are Sanctions?<br />Designated Persons: <br />Terrorist Groups, Listed Individuals and Entities<br />A government’s legislated measures against Designated Persons, certain transactions, and Countries to achieve policy objectives.<br />Two Types – Two Parts to Our Agenda<br />vs.<br />
  3. 3. What do People Sanctions Require?<br />Determine possession/control of DP Property<br />Disclose DP Property to RCMP/CSIS/FINTRAC<br />Report on Property/Screening to Regulator<br />Prevent transactions involving DP property<br />Search for the Overlap<br />
  4. 4. Our Agenda: People Sanctions<br />What financial information records should be included in the search? <br />Which lists should be searched against?<br />How often should the search take place? <br />How should we conduct the searching?<br />How do we resolve potential matches?<br />Search for the Overlap<br />
  5. 5. Our Agenda: People Sanctions<br />Determine possession/control of DP Property<br />What is Property?<br />What does Determination involve? <br />
  6. 6. Our Agenda: People Sanctions<br />Prevent transactions involving DP property<br />What controls should be effected to freeze identified property/prevent unauthorized transactions?<br />What exceptions are available to freezing?<br />How does property become unfrozen? <br />
  7. 7. Our Agenda: People Sanctions <br />Disclose DP Property to RCMP/CSIS/FINTRAC<br />When should the disclosure take place?<br />Who do you contact in the case of a match?<br />What information should you have available?<br />What reporting is required for FINTRAC?<br />
  8. 8. Our Agenda: People Sanctions<br />Report on Property/Screening to Regulator<br />What does the form represent?<br />What is the format and content of the form?<br />Who is the form submitted to?<br />When should the form be submitted?<br />Should copies of the form be kept?<br />
  9. 9. What do Purpose Sanctions Require?<br />vs.<br />Prevent transactions involving sanctioned countries and specified purposes <br />Disclose attempted transactions to RCMP/CSIS/RCMP<br />
  10. 10. Search for the Overlap<br />
  11. 11. Search for the Overlap<br />What financial information records should be included in the search? <br />Which lists should be searched against?<br />How often should the search take place? <br />How should we conduct the searching?<br />How do we resolve potential matches?<br />General form of the legislative standard: <br /> Every entity must determine on a continuing basis whether it is in possession or control of property owned or controlled by or on behalf of a Designated Person<br />According to the OSFI Instruction Guide:<br /><ul><li>Against information that FI collects and develops in the KYC process
  12. 12. Includes: Third Parties, Beneficial Owners, Beneficial Owners (to the extent reasonably possible), Trust Settlors and Trustees. [silent on transactions]</li></ul>Search for the Overlap<br />Searching obligations generally relate to FIs – some regulations require MSB searching also – such as UN Libya Regulations<br />
  13. 13. Search for the Overlap<br />What financial information records should be included in the search? <br />Which lists should be searched against?<br />How often should the search take place? <br />How should we conduct the searching?<br />How do we resolve potential matches?<br />The most current lists of Designated Persons for prevailing and applicable sanctions legislation:<br /><ul><li>United Nations Act (UNA)
  14. 14. Criminal Code (CC)
  15. 15. Special Economic Measures Act (SEMA)
  16. 16. Freezing of Assets of Corrupt Foreign Officials Act (CFOA)</li></ul>List updates should be conducted with a regular frequency (monthly) using authoritative sources – or update confirmation conducted if software driven.<br />Search for the Overlap<br />
  17. 17. Search for the Overlap: Acts<br />
  18. 18. Search for the Overlap: Acts<br />“Of 513 entries on the [UN Security Council Terrorist] list, 38 people are reported or believed to be dead... A third of the entries are missing basic information, such as full names, dates of birth and other particulars.”<br />Dead People on U.N. terrorism sanctions list: envoy, Reuters, July 14, 2009<br />
  19. 19. Search for the Overlap: Acts<br />“Of the hundreds of millions of dollars suspected of going toward funding terrorism overseas last year, $188,335 [was] frozen in 10 accounts in Canadian financial institutions as ‘terrorist assets’ at November 1, 2006.”<br />Terrorist funds almost unchecked, Edmonton Journal, September 29, 2007<br />
  20. 20. Search for the Overlap<br />
  21. 21. Search for the Overlap: The Lists<br />
  22. 22. Search for the Overlap: The Lists<br />
  23. 23. Search for the Overlap: The Lists<br />
  24. 24. Search for the Overlap<br />What financial information records should be included in the search? <br />Which lists should be searched against?<br />How often should the search take place? <br />How should we conduct the searching?<br />How do we resolve potential matches?<br />General form of the legislative standard: <br /> Every entity must determine on a continuing basis whether it is in possession or control of property owned or controlled by or on behalf of a Designated Person<br />No definition is provided for “continuing”. OSFI’s expectation is at least weekly screening. They assert that new client names should be checked against lists as part of, or as soon as reasonably possible after the opening of new accounts/changes to DP lists.<br />Search for the Overlap<br />
  25. 25. Search for the Overlap<br />What financial information records should be included in the search? <br />Which lists should be searched against?<br />How often should the search take place? <br />How should we conduct the searching?<br />How do we resolve potential matches?<br />Manual Screening (Including ad-hoc electronic searches)<br /><ul><li>All existing clients (+), every new client (+), and then every new listed DP against the entire client list (+).
  26. 26. Logged manual comparison of source list against DP list with clear and documented matching criteria and results. </li></ul>Automated Screening (Batch Driven)<br /><ul><li>All client (+) names screening routinely against current DP lists, automatically updated (verified). </li></ul>Search for the Overlap<br />
  27. 27. Search for the Overlap<br />What financial information records should be included in the search? <br />Which lists should be searched against?<br />How often should the search take place? <br />How should we conduct the searching?<br />How do we resolve potential matches?<br />There key standard:<br />“shall disclose… the existence of property… that they have reason to believe is owned or controlled by or on behalf of a listed person”<br />OSFI recommends that the assessment be made “…based on all the information available to it [including]… “know your client” information and the determination may require the use of enhanced due diligence measures in the event of uncertainty”. <br />Search for the Overlap<br />
  28. 28. Search for the Overlap<br />What financial information records should be included in the search? <br />Which lists should be searched against?<br />How often should the search take place? <br />How should we conduct the searching?<br />How do we resolve potential matches?<br />OSFI further suggests that: if an FI’s record matches or substantially matches that of a DP, the FRFI should compare personal identifiers, and may seek additional information from the client. Neither the RCMP nor CSIS are to be contacted in resolving a potential match according to the Guide. <br />In both exact and partial name matches, it is typically the personal identifier which confirms or disconfirms the match – along with circumstantial information. <br />Search for the Overlap<br />
  29. 29. Determine Possession or Control of Property<br />
  30. 30. Determine DP Property<br />Determine possession/control of DP Property<br />What is Property?<br />What does Determination involve? <br />Property means “property of every description and documents relating to or evidencing the title or right to property, or giving a right to recover or receive money or goods, and includes any funds, financial assets or economic resources.”<br />OSFI’s guidance suggest that property includes: <br /><ul><li>A positive balance in a deposit account or GIC in the name of a DP
  31. 31. A balance in excess of the amount owing on a credit card in the name of a DP (or where a DP is an authorized signer)
  32. 32. Cash and securities in a brokerage account in the name of a DP
  33. 33. Drawings by a DP under a letter of credit
  34. 34. An insurance benefit/refund claimed by the DP</li></ul>Obtain counsel’s counsel on how to proceed. <br />
  35. 35. Determine DP Property<br />Determine possession/control of DP Property<br />What is Property?<br />What does Determination involve? <br />Determination would include a search of all financial records for connections/characteristics of the DP (joint account or apparently owned/controlled property). That determination obligation becomes continuous after the initial search. <br />
  36. 36. Prevent Transactions (Freezing Property)<br />
  37. 37. Prevent Transactions<br />Prevent transactions involving DP property<br />What controls should be effected to freeze identified property/prevent unauthorized transactions?<br />What exceptions are available to freezing?<br />How does property become unfrozen? <br />Accounts/Property should be frozen according to a set procedure, with appropriate user permissions and no possibility of other than senior management override. <br />It is important to remember that there are two types of persons subject to freezing orders: <br />Those you’re obligated to screen for; and,<br />Those you’re not obligated to screen for. <br />
  38. 38. Prevent Transactions<br />Prevent transactions involving DP property<br />What controls should be effected to freeze identified property/prevent unauthorized transactions?<br />What exceptions are available to freezing?<br />How does property become unfrozen? <br />Lists of Designated Persons You Are Not Obligated to Screen For, But Can’t Transact With:<br />UN Iraq Regulations: Consolidated List of Financial Sanctions Targets – pursuant to the UNSC 661 Committee list<br />UN Côte d’Ivoire Regulations: Consolidated List of Financial Sanctions Targets – pursuant to the UNSC 1575 Committee list<br />UN Sudan Regulations: Consolidated List of Financial Sanctions Targets – pursuant to the UNSC 1591 Committee list<br />UN Democratic Republic of the Congo Regulations: Consolidated List of Financial Sanctions Targets – pursuant to the UNSC 1533 Committee List <br />
  39. 39. Prevent Transactions<br />Prevent transactions involving DP property<br />What controls should be effected to freeze identified property/prevent unauthorized transactions?<br />What exceptions are available to freezing?<br />How does property become unfrozen? <br />Act and Regulation Specific – Consult Counsel! <br />
  40. 40. Prevent Transactions<br />Prevent transactions involving DP property<br />What controls should be effected to freeze identified property/prevent unauthorized transactions?<br />What exceptions are available to freezing?<br />How does property become unfrozen? <br />Property becomes unfrozen through:<br />Judicial authorization, or,<br />At the (documented) and authoritative instruction of the entity responsible for the administration of the legislaiton (e.g. DFAIT).<br />
  41. 41. Disclosing Transactions<br />
  42. 42. Disclose<br />Disclose DP Property to RCMP/CSIS/FINTRAC<br />When should the disclosure take place?<br />Who do you contact in the case of a match?<br />What information should you have available?<br />What reporting is required for FINTRAC?<br />There key standard:<br />“shall disclose forthwith… the existence of property… that they have reason to believe is owned or controlled by or on behalf of a listed person”<br />
  43. 43. Disclose<br />Disclose DP Property to RCMP/CSIS/FINTRAC<br />When should the disclosure take place?<br />Who do you contact in the case of a match?<br />What information should you have available?<br />What reporting is required for FINTRAC?<br />It depends on which regulation the match relates to (and some regulations don’t require any reporting at all) <br />
  44. 44. Disclose – Who to Report To<br />
  45. 45. Disclose<br />Disclose DP Property to RCMP/CSIS/FINTRAC<br />When should the disclosure take place?<br />Who do you contact in the case of a match?<br />What information should you have available?<br />What reporting is required for FINTRAC?<br />Complete information regarding the reasons to believe that the person involved is the same as the Designated Person, the measures taken to identify their property, personal identifiers details of property identified, associated accounts/persons, and transactions conducted/attempted. <br />
  46. 46. Disclose<br />Disclose DP Property to RCMP/CSIS/FINTRAC<br />When should the disclosure take place?<br />Who do you contact in the case of a match?<br />What information should you have available?<br />What reporting is required for FINTRAC?<br />Prescribed Terrorist Property reporting: <br /><ul><li>Regulations Implementing the UN Resolutions on the Suppression of Terrorism
  47. 47. UN Al-Qaida and Taliban Regulations
  48. 48. Criminal Code</li></ul>Judgment based Suspicious Transaction Reporting: Consider whether the transactions conducted or attempted by the Designated Purposes is tainted by the affiliation (particularly important in the case of matches from the Freezing Assets of Corrupt Foreign Officials, for instance).<br />
  49. 49. Reporting Transactions<br />
  50. 50. Monthly Reporting<br />Report on Property/Screening to Regulator<br />What does the form represent?<br />What is the format and content of the form?<br />Who is the form submitted to?<br />When should the form be submitted?<br />Should copies of the form be kept?<br />A declaration of terrorist property in the possession/Control of the FI<br />FRFI’s: 525 Long Form (property to report) and 525 Short Form (Nil Report)<br /> Others: Relevant form (usually based on the 525 standard)<br />FRFI’s: OSFI<br /> Others: Relevant regulator<br />Monthly filing by the 15th of the month following calendar month to which the form relates<br />Yes!<br />
  51. 51. Monthly Reporting<br />
  52. 52. Purpose Sanctions<br />
  53. 53. What do Purpose Sanctions Require?<br />vs.<br />Prevent transactions involving sanctioned countries and specified purposes <br />Disclose attempted transactions to RCMP/CSIS/FINTRAC<br />
  54. 54. Applicable Acts<br />
  55. 55. Prevent Transactions – UNA/SEMA<br />Prevent transactions involving sanctioned countries and specified purposes <br />
  56. 56. Prevent Transactions – UNA/SEMA<br />Prevent transactions involving sanctioned countries and specified purposes <br />
  57. 57. Prevent Transactions – EIPA<br />Prevent transactions involving sanctioned countries and specified purposes <br />Permits are required for the export of any goods to countries listed in the ACL, currently Myanmar (Burma) and Belarus. <br />Permits are required for the export of goods on the ECL and the import of goods on the ICL. <br />The ECL list particularly seeks to control the states to which military goods and technology are exported. <br />The ICL requires permits for items such as weapons, textiles and apparel, and certain animals and foods. For some of those items, state prescriptions are specified.<br />
  58. 58. Disclose<br />Disclose to RCMP/CSIS/FINTRAC<br />Who do you report to? <br />Transactions are prohibited. <br />Reporting entities should consider reporting attempted transactions to authority responsible for the administration of the legislation. (consult counsel) <br />Attempted transactions should be considered for Judgment based Suspicious Transaction Reporting.<br />
  59. 59. Key Questions…<br />Should you be screening for purpose based transactions?<br />How will you assess whether they are prohibited if you do?<br />
  60. 60. A Note on Recent FATF Notices<br />All transactions involving Iran and DPRK should be subject to documented scrutiny for potential suspicious transaction reporting <br />
  61. 61. Post-Webinar Checklist<br />Documented policies and procedures for sanctions compliance<br />Documented (and effective) method for compiling/maintaining the right set of lists<br />Documented (and effective) method for comparing the right set of lists against the right set of client information (including third parties)<br />Documented (and effective) method for assessing and documenting potential matches<br />Documented (and effective) method for routine and match-driven reporting<br />Documented (and effective) method for wire screening [people and purpose based transactions]<br />
  62. 62. Reference Sources<br />http://www.amlcompliance.ca/<br />aml-compliance-obligations/<br />economic-sanctions-compliance/<br />http://www.international.gc.ca/sanctions/<br />http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/issues/sanctions/osfi590/dsninstr_e.pdf<br />
  63. 63. Questions<br />
  64. 64. How We Help Our Clients<br />They Want Us to Evaluate Their Elevator to Make Sure it Won’t Get Stuck<br />Compliance Reviews (for themselves and their clients)<br />Internal audit assistance <br />External audit assistance <br />They’re Stuck in Your Elevator<br />FINTRAC Examination Preparation/Remediation<br />They Think They Need Too Many Gerbils to Run Your Elevator<br />Risk and Technology Tuning<br />
  65. 65. Matthew McGuire, <br />BA(Hons), MAcc, CA, DIFA, CAMS, AMLP <br />Director and Anti-Money Laundering Warrior<br />Williams McGuire AML Inc. <br />(416)969-8166 extension 227<br />matthew.mcguire@amlcompliance.ca<br />

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