System of Internal Policies, Procedures, and Controls Flashcards
Foundational to a successful AML/CFT program
Policies, Procedures and controls. Establishment and continual development
AML/CFT program should ?
Explain the 4
This program should
1) outlines how FI is fulfilling its regulatory requirement
2) Indicate the risk appetite of the
business- Risks the FI is prepared to accept and those it is not.
3)Mitigate the AML/CFT risk
4) Laws and regulations that the financial institution must comply with
larger financial institutions, what sort of approach is recommned towards AML/CFT program and Why?
Adopt an enterprise-wide approach that
allows for consistency in the manner in which the financial institution manages its ML/TF risk and also accommodate regional and/or business line-specific requirements.
Explain creation of Baseline of procedures and controls for LOB
Post executive management and the
board of directors approve the AML/CFT policy , this will serve as a baseline on how LOB will achieve compliance with laws and regulations, as
well as with the organization’s AML/CFT policies.
Explain benefits AML/CFT operating procedures
1) standard AML/CFT operating procedure is drafted at Operational level.
2) They translate policy into acceptable and workable practices
3) It also acts a component for AML/CFT training and compliance monitoring programs.
How do the FI ensure that AML/CFT program keeps going
1) Creation of variety of internal controls
2) Creation of built-in safeguards that
keep the program working.
3) second review and approval of actions
4) use of Technology
Key difference between AML/CFT Policy, procudre and Control
Policy
Clear and simple high-level statements that are uniform across the
entire organization (sets the tone from the top).
Approved by executive management or the board of directors.
Reflects the high-level responsibilities of the stakeholders through-
out the organization.
Procedures
Translates the AML/CFT policies into an acceptable and work-
able practice, tasking the stakeholders with their respective
responsibilities.
May be established at the operational (not executive) level of the
financial institution. These are the instructions on how an institu-
tion wants something done.
Much more detailed than AML policies.
Reviewed and updated regularly.
3 Controls
The internal technology or tools the financial institution utilizes
to ensure the AML/CFT program is functioning as intended and
within predefined parameters.
Alerts compliance to potential outliers or deviations from normal
policy that may need to be reviewed.
Includes management reports, automated review systems, or the
utilisation of multiple reviewers.
What is second line of defense.
The compliance function is commonly referred to as the second line of defense
Can two different FI can have two same Compliance Function
No two institutions will have exactly the same compliance structure because the risk
facing each institution is going to be different,
Who Appoints a Compliance Officers
The board of directors is responsible for appointing a qualified individual as an institution’s AML/CFT Compliance Officer.
Examples of AML/CFT subgroups
Program Management, Sanction Screening, Transaction Monitoring, Financial Investigations
Who will be first line of contact for line of business questions on AML/CFT matters.
Know Your Customer, Subgroup of AML/CFT program
What does the training include
Both formal training courses and ongoing communications. like Emails
Explains steps in designing an effective AML/CFT training program
WHO , WHAT, HOW, WHEN, WHERE TO TRAIN
Who is included in First Line of Defence for Training Program
Customer-facing staff and Operations personnel:
Who is included in Second Line of Defence for Training Program
AML/CFT compliance staff:
Who is included in Third Line of Defence for Training Program
Independent testing staff:
What training is provided to First Line of Defence
General Course to address importance of AML.
Basis specific LOB, Like Loan, Cash, credit, staff may be provided some additional training on specific unit procedures.
Which set of employees require the deepest practical understanding of AML/CFT
Employees part of First Line of Defence
Which set of employees require the deepest practical understanding of AML/CFT
Employees part of First Line of Defence
Who are Operational Personnel
Non-customer facing personnel. Example cash vault, wire transfer, trade finance, loan
underwriters, loan collections, and treasury management personnel are oftentimes in posi-
tions to recognize illegal, fraudulent, or unusual account activity.
Who are AML/CFT compliance staff?
they work under the direction of direction of a designated compliance officer. They are the second line of defence. They coordinates and monitors the organization’s day-to-day AML/CFT compliance
program.
What sort of Training is provided to the second line of Defence
more advanced ongoing trainings are required to stay abreast of requirements and emerging trends. Example. Attend Conference or or AML/CFT- specific presentations that are more robust in nature.
What sort of training is provided to third Line of Defence
As they accesses the adequacy of periodic training concerning regulatory requirements, they receive Periodic training concerning regulatory requirements, changes in regulation,
What will an effective internal audit department will develop and maintain
an audit risk assessment
What should the Audit team do with Internal audit department
Corrective action must tracked as well as indicate
the target date for completion and the personnel responsible.
What are the guidelines for cml and CFT program recommended by Fincen
dcdc
What are 8 minimum requirements for dfs
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