AML Compliance Roadmap
Your company's compliance roadmap for AML/CTF should be based on the guidance provided by your supervisory authority. In general, this will involve the following steps:
- Step 1: Prepare written AML/CTF policies and procedures, update them for the risks identified in your risk assessments, and communicate them to your employees. These may include the overall AML and CTF policies, and specific policies and procedures to deal with Client Due Diligence (CDD), Suspicious Activity Reporting (SAR), Politically Exposed Persons (PEPs), etc.
- Step 2: Train your employees and associated persons to identify and report suspected cases of money laundering and terrorist financing.
- Step 3: Implement a SAR register to make it really easy and convenient for your employees to report knowledge or suspicion of these crimes.
- Step 4: Implement questionnaires and declarations from your employees and third parties to conduct initial CDD and ongoing CDD in a timely way.
- Step 5: Offer an anonymous whistleblowing register that your staff and use to report suspicions of wrongdoing internally or external sources.
- Step 6: Conduct anonymous staff surveys to uncover deficiencies in your internal controls and external threats and inform the continuous compliance improvements.
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Policy Attestations
The AML/CTF regulations require you to prepare and maintain written policies, controls and procedures that show how your business will manage the risks of money laundering and terrorist financing identified in your risk assessments. However, for them to be effective, you must ensure that they are communicated to all staff, and to new hires promptly after they join your company, and you must seek their affirmation that they understand and will abide by these policies, controls and procedures.
With Skillcast's online Policy Hub you can require employees to review and attest all the relevant policies in a timely and efficient manner. Thus you can evidence to your supervisory authority.
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AML/CTF Training
The regulations require you to train your employees and agents to ensure that they are aware of the risks of money laundering and terrorist financing, the relevant legislation, and their obligations under that legislation, know who the nominated officer is and what their responsibilities are in relation to CDD and SAR.
You must provide the training at regular intervals, at least every two years, and you must maintain a record of when and what training everyone has undertaken.
However, the repeated training that's required to comply can cause staff fatigue. Therefore, Skillcast provides its clients with an array of AML/CTF courses to help keep their staff aware and engaged on this risk:
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Client Due Diligence
You may need clients and other third parties to complete disclosures or declarations regarding compliance with money laundering regulations and your own policies, controls and procedures.
Using email of paper-based processes is slow, inefficient and creates unnecessary duplication.
Using our online compliance declarations will help you to streamline the collection, analysis and management of due diligence for associated persons outside your organisation.
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AML Report Findings
The Treasury's anti-money laundering (AML) supervision report for 2022-23 highlights significant non-compliance among accounting firms with AML regulations. Here are some key takeaways to consider:
1. High Non-Compliance Rate: 18% of reviewed firms were found non-compliant, based on assessments of 2,569 firms by 13 professional body supervisors. This equates to 467 firms being non-compliant out of the total 34,309 AML-supervised firms.
2. Professional Body Discrepancies: The rate of non-compliance varied significantly among professional bodies. For example, 82% of firms reviewed by the Institute of Certified Bookkeepers were non-compliant, while none of the firms reviewed by the Insolvency Practitioners Association were found non-compliant.
3. Common Issues: Major non-compliance issues included inadequate firm-wide AML risk assessments, insufficiently tailored AML policies, controls and procedures, and inadequate client due diligence.
4. Review Process: There was a variation in compliance outcomes depending on whether reviews were conducted onsite or desk-based, with onsite visits showing slightly higher non-compliance rates.
5. Community Concerns: The AccountingWEB community expressed concerns about the effectiveness of the current AML compliance processes and the challenges faced, especially by smaller firms. Members questioned the actual impact of non-compliance and the practicality of thorough reviews for all firms.
6. Need for Practical Improvements: Experts like David Winch pointed out that many non-compliance issues could be fixed, suggesting that firms could improve their AML practices with the right adjustments and support.
These points underline the need for better support and practical guidance for firms to meet AML regulations, while also highlighting the disparities in compliance across different professional bodies and the challenges faced by smaller firms.
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SAR Register
One of the cornerstones of AML/CTF compliance is to ensure your staff and your agents are trained to recognise suspicious customers and transactions and report these suspicions to your nominated officer.
To encourage your employees to file timely and high-quality SARs you should consider offering them an online SAR register. You also need to be able to channel the SARs being submitted so that they are categorised and followed up as appropriate.
The Skillcast Declarations Tool helps you to manage your SARs efficiently and analyse the data over time to ensure compliance with your AML/CTF policies, controls and procedures.
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Whistleblowing
Blowing the whistle about internal and external malpractices is vital for the functioning and survival of companies.
Whistleblowing is the process by which employees can report suspected or actual improper conduct. It is done in confidence or anonymously, which is vital as staff may feel unsafe or unable to report such behaviour to management.
A solution is to create an online whistleblowing register, enabling your employees to report any suspicion or knowledge of AML/CTF breaches anonymously.
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Staff Surveys
Your employees and any customer-facing agents are the best defence against money launderers and terrorist financiers who may try to exploit your business for financial crime, and their knowledge about the effectiveness of your compliance procedures and the nature of external threats is invaluable.
Staff surveys and questionnaires provide an important source of information on the effectiveness and a means by which employees and other associated persons can inform the continuing improvement of AML/CTF policies, controls and procedures.
Skillcast Compliance Survey Tool can help you to conduct robust, anonymous staff surveys that ensure the widest coverage and enable employees to feedback to you in confidence.
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Best Practices in AML
If you'd like to stay up to date with AML best practices, industry insights and key trends across regulatory compliance, digital learning, EdTech and RegTech news subscribe to the Skillcast Compliance Bulletin.
Future EU AML Regulations
The EU’s latest anti-money laundering (AML) package was unveiled in July 2021 - a directive and three regulations. These bold recommendations, which implement the European Commission’s (EC) May 2020 Action Plan, represent the most significant revamp of the EU’s anti-money laundering and counter-terrorist financing legislation to date.
Small Businesses & Money Laundering
Money launderers target small businesses because they are less likely to be scrutinised. Additionally, some small businesses may be more susceptible to money laundering due to the nature of their operations, such as those dealing with large amounts of cash or customers from high-risk jurisdictions.
Cryptocurrency Money Laundering Risks
Virtual currencies that were once the domain of the anti-establishment, are being embraced by corporations to diversify investments and disrupt legacy systems. Yet, it is clear that these are not without their risks, particularly where anti-money laundering (AML) and counter-terrorist financing (CTF) are concerned.
6AMLD the Five Key Changes
6AMLD was needed to provide greater clarity and harmonisation across EU member states. It introduced dual criminality and 22 EU wide predicate offences. In addition a new offence of aiding and abetting plus extended criminal liability to individuals.
5MLD Key Requirements You Need to Know
5MLD was an EU response to a series of terrorist attacks in Europe, large data leaks including the Panama Papers in 2017, the unprecedented rise in the use of cryptocurrencies and the ongoing intent by the EU to fully implement the FATF Recommendations by all its member states.
4MLD Key Requirements You Need to Know
4MLD aimed to bring a more robust risk-based approach to tackling money laundering and counter-terrorist financing. Penalties became much tougher, with fines of up to 10% of total annual turnover, or €5 million for individuals. In addition, publicly issued reprimands could be given, which could damage the reputation of a firm.
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Free AML Resources
We have 100+ free compliance training aids, including assessments, best practice guides, checklists, desk-aids, eBooks, games, handouts, posters, training presentations and even e-learning modules.
MLRO Responsibilities Checklist
Wondering what a Money Laundering Reporting Officer (MLRO) does and what their key responsibilities should be? Our checklist identifies the 20 key areas of responsibility that should fall under the MLRO's remit.
Sixth Money Laundering Directive Training (6AMLD/6MLD/AMLD6)
Our free training presentation provides an ideal platform to help your employees understand what 6MLD means and the responsibilities they have as employees to ensure your business is well-educated on this Directive.
AML Checks Training Aid
Our AML Checks training aid outlines everything your firm needs to be aware of in order to minimise the risk of money laundering.
Fifth Money Laundering Directive Training (5AMLD/5MLD/AMLD5)
Our free training presentation provides an ideal platform to help your employees understand what 5MLD means and the responsibilities they have as employees to ensure your business is well-educated on this Directive.
Fourth Money Laundering Directive Training (4AMLD/4MLD/AMLD4)
Our free training presentation provides an ideal platform to help your employees understand what 4MLD means and the responsibilities they have as employees to ensure your business is well educated on this Directive.
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AML EU Directives
The European Commission carries out risk assessments to identify and respond to risks affecting the EU internal market. It promotes the adoption of global solutions to respond to these threats at an international level.
It has adopted robust legislation to fight against money laundering and counter-terrorist financing. The Commission ensures effective application of this legislation by reviewing the transposition of EU acquis and working with networks of competent authorities.
Fighting money laundering and terrorist financing contributes to global security, integrity of the financial system and sustainable growth. Laws to combat money laundering and the financing of terrorism are designed to prevent the financial market from being misused for these purposes.
First Money Laundering Directive (1AMLD/1MLD/AMLD1)
The First Money Laundering Directive (Council Directive 91/308/EEC) provided the initial framework for the subsequent Second and Third Directives.
Key preventative measures were established including customer/client identification, record-keeping and central methods of reporting suspicious transactions.
It was passed to ensure a universal approach was adopted by the EU Member States to combat the problem of money laundering, thus protecting the EU Single Market.
Second Money Laundering Directive (2AMLD/2MLD/AMLD2)
The Second Directive adopted a broader definition of money laundering, taking into account underlying offences such as corruption and thus expanding the predicate offences.
It clarified that currency exchange offices, money transmitters and investment firms were included within the scope of the directive as they were susceptible to money laundering transactions.
In addition, authority was added to identify, trace, freeze, seize and confiscate any property and proceeds linked to criminal activities.
Third Money Laundering Directive (3AMLD/3MLD/AMLD3)
The Third Money Laundering Directive (3MLD) sought to prevent the financial and certain non-financial sectors from being used for money laundering and terrorist financing in line with Financial Action Task Force (FATF) global standards.
It set out measures to establish the true identity of customers, report suspicious transactions and set up preventive systems within their organisations.
Fourth Money Laundering Directive (4AMLD/4MLD/AMLD4)
The EU implemented the Fourth Money Laundering Directive (4MLD) in June 2017 to bring a more risk-based approach to tackling money laundering and counter-terrorist financing.
The changes impose new responsibilities upon businesses, starting with reinforcing their existing risk-based approaches across all aspects of their AML/CTF compliance programmes.
Fifth Money Laundering Directive (5AMLD/5MLD/AMLD5)
On 19 June 2018, the 5MLD (Directive (EU) 2018/843), which amended the 4th anti-money laundering Directive, was published in the Official Journal of the European Union. The Member States had to transpose this Directive by 10 January 2020.
5MLD amended 4MLD and includes lessons learnt from the Paris and Brussels terrorist attacks and the Panama papers, plus technological innovation.
The changes impose new responsibilities on businesses, addressing issues including Enhanced Due Diligence (EDD), Politically Exposed Persons (PEP), new technologies and beneficial ownership.
Sixth Money Laundering Directive (6AMLD/6MLD/AMLD6)
Although 6AMLD contains far fewer changes than 5AMLD, it requires businesses to be a lot more proactive.
This tougher stance looks beyond the mechanics of compliance and instead focuses on tackling the heinous crimes enabled by money laundering (including trafficking, bribery, and so on).
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