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Giana Quandt ,Senior Consul tant S imon Consulti ng VBA

Presentati on BBA Bank N.V.August 1, 2013

IS TOO MUCH COMPLIANCE A BAD THING?

STRENGTHENING THE INTER-RELATIONSHIP BETWEEN THE REGULATORS AND THE FINANCIAL

INSTITUTION TO MITIGATE CHANCE OF DISCREPANCIES

FACILITATORS

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Pierre SimonManaging Director

Simon Consulti ng Group

Giana Quandt, LLM CAMSSenior Consultant

Simon Consulti ng VBA

11:00-11:05 Welcome and Introducti on 11:05-12:00 The importance of the integrati on of Regulati on for the Onshore Banking Enti ty12:05-12:45 Trends in AML12:45-13:00 Wrap-up13:00 End of Presentati on

AGENDA

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Financial stability is crucial to the well-being of a modern economy

Investors may need protection from the risks posed by complex financial products

The introduction of unusual or suspicious transaction reporting by the regulated sector

NECESSITY FOR REGULATION

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Regulator = Trust

THE MONEY LAUNDERING PROCESS

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AML/CFT BUSINESS PROCESS OVERVIEW

REGULATOR’S VS FINANCIAL SECTOR MAIN GOALS

The main Regulator ’s aim is to create successful circumstances for the fi nancial sector:

effi cientprofi table /good servicesmore valuable moneyextended access to aff ordable services

√ Regulated Firms have similar goals√ This creates a strong shared interest, despite inevitable

tensions.

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INTERCONNECTEDNESS OF REGULATION

State Ordinance AML/ CFT AB 2011 no 28

Internal Codes and practice

Guidance Material AML Handbook

FATF RECOMMENDATION 5

Customer due diligence

CDD measures, including Identifying and verifying the identity of their customers.

CDD on a risk sensitive basis

FATF Recommendation 6 (politically exposed persons)

FATF Recommendation 7 (correspondent banking)

FATF Recommendation 8 (non-face-to-face customers)

FATF Recommendation 9 (intermediaries)

FATF Recommendation 10 (Record Keeping)

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KEY AML/CFT PRINCIPLES IN ARUBA

The 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 4 – eff ecti ve reporti ng;Principle 5 – high standard screening and appropriate training;

andPrinciple 6 – evidence of compliance.

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BUILDING AN EFFECTIVE RELATIONSHIP

“Main elements:Acti ve management (on both sides)Practi cal arrangements, e.g. interconnecti onProvision of full informati onArrangements to ensure complianceStraightf orward approach to enforcement “

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MLCO WORK FLOW

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PROCESS OVERVIEW

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OVERVIEW EFFECTS OF NON COMPLIANCE

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MLCO REPORTING

What are the requirements?Monthly reporting by MLRO to senior

management ( Board of Trustees) Assess the adequacy and eff ectiveness of the

firms AML/CFT policies, procedures, systems and controls in preventing ML/TF as shown in slide 11

Timely reporting to allow senior management to deal with the report

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STRATEGIC CONSIDERATION OF THE MLCO REPORT

Consider and scrutinize each report made by the MLCO

Promote Raising knowledge and awareness in the organization

Stress the importance of detecting unusual transactions

If deficiencies are identified – approve an action plan to remedy gaps

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SECTION 2:

GLOBAL TRENDS

MONEY LAUNDERING TRENDS

Traditional methods - cash based businessesReal estate, loans and trade based money

launderingCredit cards issued by offshore banks has

increasedElectronic money and internet-based trading

and gambling

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TAX EVASION

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OWNERSHIP

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FALSE INVOICING

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REAL ESTATE

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‘TRADE BASED MONEY LAUNDERING’

Over- and under-invoicingMulti ple Bill ingFicti ti ous transacti ons

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INTERPLAY WITH OTHER WHITE COLLAR COMPLIANCE RISKS

FATCA US legislati on designed to force foreign fi nancial insti tuti ons (FFIs) to disclose their US account holders

• Operates by imposing 30% withholding on payments

• In AuA, will most likely apply via an Inter Governmental Agreement (IGA)

• IGA will align FATCA more with FATF concepts but will apply to FFIs even if no US assets

• Requires additional KYC/CDD over AML/CFT requirements

• Will require inter-agency cooperation and information sharing23

INTERPLAY WITH OTHER WHITE COLLAR COMPLIANCE RISKS - REQUIREMENTS

Sancti onsComplex sancti ons obligati ons: UN, domesti c

legislati on, consider foreign restricti ons (eg. US)Regulatory and commercial considerati onsKYC/CDDTerrorist fi nancing risk ti e-ins

entity listsactivities (risk flags for further KYC/CDD)

If serious enforcement contemplated, requires inter-agency cooperati on

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WRAP UP

In closing

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SUMMARYBoard of Directors (BOD) & Senior Management (SM) overall responsibility

Appointment of Board

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

Develop time bound implementation Plan

EXEMPLARY GOVERNANCE

INTEGRATED COMPLIANCE

MANAGEMENT

CONTROL STRUCTURE

INFORMATION & COMMUNICATION

MONITORING

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CONCLUSIONS

AML/CFT is the “latest” in a long line of criminalisati on of corporate misconduct

Even if your agency is not directly involved, it plays an important role through Integrity of data Inter-play of white collar criminal detection and

enforcementYour contributi on in ensuring AML/CFT compliance

will contribute to a healthy fi nancial sector

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THANK YOU FOR YOUR

ATTENTION