AML-CFT compliance has become the main focus of regulators in recent years. This is evidenced by the increase in regulatory penalties imposed against financial institutions for failure to implement adequate controls to combat ML-TF risks. In light of this scrutiny, it is vital for financial institutions to make AML-CFT compliance a top priority and such effort begins with the institution’s board of directors. The board of directors is the primary governing body of a financial institution and is typically entrusted with fiduciary obligations. One such fiduciary duty includes ensuring that the institution has a comprehensive and effective compliance program.
To start with, the Board of directors is responsible for approving and implementing the Company’s AML-CFT compliance program. The Board is also responsible for overseeing the structure and management of the Company’s AML-CFT compliance program, including the designation of the Compliance Officer and the Money-Laundering Reporting Officer and ensuring that the latters are fully capable, qualified and properly skilled. The Board is also responsible to set-up an appropriate compliance culture including frequent communication and reinforcement measures, so that all employees are aware of AML-CFT threats and risks.
Furthermore, the Board also has the primary responsibility of designing and implementing internal policies, procedures and controls to ensure that all ML-TF risks are properly mitigated. The Board is also responsible to undertake an independent AML-CFT compliance audit and the exercise must include a requirement for sample testing of the effectiveness and adequacy of the financial institution’s policies, procedures and controls. The Board shall then adopt recommendations made following the completion of the independent audit.
The Board is also responsible to undertake a business risk assessment and must ensure that the Company’s risk policy takes into account the size, nature and complexity of the business of the financial institution. The policy The Board must also document its systems and controls (including policies and procedures) and clearly apportion responsibilities for ML and TF, and, in particular, responsibilities of the MLRO and Compliance Officer
Lastly, the Board is also responsible for overseeing that all employees receive AML-CFT related trainings to ensure that employees identify and report red flags of suspicious transactions in a timely manner. The Board needs to also assess and demonstrate the effectiveness of trainings provided to employees. According to a report by Lacey Advocates (2020), the Boards of directors must be confident as to the adequacy of the AML/CFT training and its effectiveness and requires the Boards to monitor the training being provided by asking the following questions:
- How comprehensive was the last report the Board received on its AML-CFT training?
- Was the training tailored to the local legal and regulatory regimes?
- When and how did the board ensure testing the effectiveness of the training?
- When were employees last tested on their awareness of risks, of the relevant policies and procedures and on their legal and regulatory obligations?
- Is the board confident that, from the training provided, all employees at all levels are able to recognise the need to file an STR and, importantly, how to do so?
To conclude, the Board’s oversight of an institution’s AML-CFT compliance program is crucial to its success. Board involvement goes a long way toward promoting an institution’s culture of compliance and sends a strong message that AML-CFT compliance is a company-wide responsibility. A solid understanding, by both the Board and the Compliance Officer, of their respective roles with regard to the program as well as regular communications between board members and the Compliance Officer will help ensure a strong and effective AML-CFT compliance program.
How can Temple Consulting help you?
Temple Consulting Ltd specializes in the provision of compliance consultancy services to firms which are licensed by the Financial Services Commission and the Bank of Mauritius and has expert consultants who provide compliance advices on the prevention of financial crime, the adoption of anti-money laundering processes, and measures to combat terrorism financing.
Temple Consulting Ltd also provide assistance at any stage of the business cycle, including assistance during FSC inspections, remedial plan submission and support.
Through its sister company, Temple Professionals Ltd provides a wide range of AML-CFT related courses and in-house trainings for junior employees, the Compliance Officer, the Money Laundering Reporting Officer and Senior Management.
For more information, kindly contact us on 210 35 88 or templeconsulting@templegroup.mu
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