Handbook on Anti-Money Laundering and Combating the Financing of Terrorism for Nonbank Financial Institutions

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• Publisher: Asian Development Bank
• Year: 2017
• Print ISBN: 9789292577612
• eBook ISBN: 9789292577629
• Topic: Commerce
• Subtopic: Gestion des risques financiers

This handbook provides nonbanking financial institutions guidance on how to manage risks associated with money laundering and the financing of terrorism. It reflects the requirements of the international standard setter in the fight against money laundering and terrorist financing---the Financial Action Task Force---and is intended to serve as the basis for developing internal controls and procedures by nonbanking financial institutions to combat such actions.

APPENDIX 1
Responsibilities and Roles of Directors and Senior Management

Minimum requirements

Directors and senior managers must

• undertake a risk assessment which identifies the vulnerability of the nonbank financial institution (NBFI) to be used to launder money or finance terrorists;

• on the basis of the risk assessment, implement a risk management framework to ensure that the NBFI is not used to launder money or finance terrorists;

• ensure that the risk management framework is risk based with sufficient resources being devoted to dealing with higher-risk customers and transactions;

• ensure that the NBFI has appropriate compliance management arrangements, including the appointment of a compliance officer at management level; and

• devote sufficient resources to deal with money laundering and terrorist financing, including ensuring that the compliance function is adequately resourced and that staff receive appropriate and adequate training.

Actions required

Senior managers must

• carry out a risk assessment, which should be reviewed and updated on a regular basis, identifying where the business is vulnerable to money laundering and terrorist financing;

• based on the risk assessment, develop internal policies, procedures, and controls to combat money laundering and the financing of terrorism;

• ensure staff effectively implement the internal policies, procedures, and controls and receive appropriate training; and

• monitor the implementation of the NBFI’s policies, procedures, and controls and make improvements where required on the basis of changes to the NBFI’s money laundering and terrorist financing risk assessment or as recommended by the supervisory agency and/or the financial intelligence unit.

Responsibilities

Senior managers are responsible for the effective implementation of a risk-based approach to the management of money laundering and terrorist financing risk. The management of risk needs to be reviewed and updated from time to time to reflect changes in the NBFI’s strategy or other factors such as changes to the law. Policies and procedures should take into account risk factors relating to the customer, product and service, delivery channel, and geographic location of the customer. Where higher risks are identified, based on the NBFI’s risk assessment, the staff must take extra measures and senior management should ensure that the staff fully understand and implement the requirements of the policies and procedures.

APPENDIX 2
Responsibilities and Roles of the Compliance Officer

The compliance officer is responsible for the following actions:

• Receiving inputs from staff and making suspicious transaction reports to the financial intelligence unit.

• Developing and maintaining the anti-money laundering and counterterrorist financing policy and internal procedures of the nonbank financial institution (NBFI) in line with legal requirements.

• Assisting the management in developing and maintaining an effective anti-money laundering and counterterrorist financing compliance culture.

• Ensuring adequate documentation of the NBFI’s risk management policies regarding prevention of money laundering and terrorist financing, risk assessments, and their application.

• Determining and updating, in consultation with the senior management, a risk-based approach regarding money laundering and terrorist financing and the risk assessment of the NBFI’s customers, products, services, delivery channels, and geographic reach.

• Ensuring that all internal suspicious activity reports received are investigated without delay.

• Submitting suspicious transaction reports to the financial intelligence unit.

• Providing initial and updated training for all relevant staff, including all staff who handle cash transactions, and customer payments and transactions.

• Providing awareness training to the staff and the senior management.

• Ensuring that the staff are aware of and complying with their obligations under the law and the NBFI’s policies and procedures and that the basis for the risk-based approach to managing money laundering and terrorist financing risks is understood and applied.

• Presenting reports to the board, chief executive officer, and the senior management; making recommendations, if any, for action to remedy any deficiencies in the policies, procedures, systems, or controls and following up on those recommendations.¹

• Representing the NBFI at all external agencies, for example, supervisory, regulatory, or law enforcement agencies.

• Conducting intraday review of all alerts regarding all incoming and outgoing payments and taking the necessary decisions on reported matches and false positives in relation to money laundering or terrorist financing.

• Ensuring that he or she is aware of any relevant sanctions and prohibition or advisory notices issued by the supervisory agency, the financial intelligence unit, or other agencies such as the United Nations Security Council.

• Responding promptly to any reasonable request for information from the supervisory, regulatory, and/or law enforcement agencies.

• Ensuring that the required screening of all new accounts, relationship updates, and ongoing updates of enhanced due diligence and risk assessment reports are carried out in accordance with the requirements of the NBFI’s policy statement.

• Ensuring that an automated list of all high-risk customers is produced.²

• Ensuring that all required updates of the risk assessment reports and enhanced monitoring processes are adhered to.

APPENDIX 3
Responsibilities and Roles of the Management

The management is responsible for the following actions:

• Assisting in establishing and maintaining an effective compliance culture within the nonbank financial institution (NBFI) to combat money laundering, terrorist financing, and other forms of financial crime(s).

• Ensuring that procedures regarding anti-money laundering and counterterrorist financing are part of operational procedures.

• Ensuring that all day-to-day procedures contained in this handbook are working successfully and are being correctly applied.

• Advising the compliance officer of any problems in procedures that have arisen and where changes to the procedures may be necessary to resolve those problems.

• Monitoring the effectiveness of the policies, procedures, systems, and controls within their relevant business areas and assisting in the preparation of relevant reports to the board.

• Assisting with the risk assessment of the NBFI’s customers, counterparties, products, or services and ensuring that the risk assessment is kept up to date in the light of changing circumstances.

• Ensuring that the compliance officer is provided with any relevant customer, counterparty, or correspondent NBFI information available to them or their business units.

• Ensuring that the compliance officer is promptly advised where there are reasonable grounds to know or suspect that activity(ies), transactions, or instructions are linked to money laundering or terrorist financing.

• Ensuring that the staff for whom they are responsible understand the NBFI’s risk-based approach toward preventing money laundering and terrorist financing, and that they apply it appropriately in their day-to-day operations.

• Ensuring that all the relevant staff receive training specifically tailored to their day-to-day activities in relation to money laundering and the financing of terrorism.

APPENDIX 4
Responsibilities and Roles of the Staff

The staff is responsible for the following actions:

• Ensuring that no action is undertaken on behalf of a customer without a clear understanding of the purpose and background of the transaction(s) or activity(ies).

• Reporting promptly to the compliance officer when they have knowledge or suspicion of money laundering or the financing of terrorism or where there are reasonable grounds to know of or suspect money laundering or terrorist financing.

• Not tipping off any customer or any person that a suspicious transaction report has been made or that their account and/or transactions are under investigation either internally by the compliance officer or externally by the financial intelligence unit.

• Assisting fully with any investigation.

• Completing a record of when they have received anti-money laundering training and the nature of that training.

APPENDIX 5
Example of a Risk Assessment Form

Anti-Money Laundering and Combating the Financing of Terrorism—Risk-Based Approach Matrix

Customer types

Note: All accounts are subject to a variety of risk “scores” on various factors, e.g., client, product, location, and delivery chan...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• Foreword
• Abbreviations
• Overview
• Part A: Policies and Standards
• Part B: Procedures
• Glossary
• Appendixes
• References
• Footnotes
• Back Cover