Document

Report
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Securities & Investment Institute
Risk Forum
The New JMLSG 2006 Guidance
April 2006
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What are the key changes?
• Greater recognition of senior management
responsibilities – they must manage!
• The requirement for a risk based approach is
clear
• The “changed” role for the MLRO
• A revised approach to customer due diligence
• Less due diligence v more monitoring
• Training implications
• Differentiation between different business
sectors
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Senior Management
• Not actually changed but likely to be very
different!
• Involvement
• Responsibility, particularly for the risk based
process
• Ultimate responsibility for all except the
MLRO’s statutory responsibilities
• Obligation to designate one member of senior
management to represent all in AML
compliance matters – but overall responsibility
not delegated
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The Risk Based Approach
• Key change but only broad guidance
• Identify and assess the actual AML/CTF risks
• Design and put in place processes and
controls to mitigate the identified risks, on a
proportionate and cost-effective basis
• Some residual risk can still be acceptable
• Determine management information
requirements for senior management to enable
their monitoring of the effectiveness of the
regime for which they are responsible
• Keep records
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The MLRO
• Responsible for oversight of compliance with
the FSA regime of rules on systems and
controls to prevent money laundering
• Not the same responsibilities as the
‘Nominated Officer’ in statute
• Old FSA hallmarks of seniority, capability and
resources all still important
• Still reports to management
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Customer Due Diligence
• Information collected v information verified
• A start point standard level of verification to
then be varied to reflect risk
• Allow for those customers/clients who cannot
be expected to meet standard requirements
• Flexibility and judgement in reaching
satisfaction
• Potentially much greater use of electronic
verification
• Potentially much greater reliance on other
regulated firms
Initial Due Diligence v
Ongoing Monitoring
• Establish the basic standard – not necessarilly
a minimum standard!
• Flex the standard to reflect the risk
• Reduced workloads for some customers’ due
diligence may be offset by greater ongoing
monitoring needs
• Determine and establish monitoring needs,
monitoring levels being geared to reflect risks
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Training
• Nominally not much different from old regime
– met the statutory requirements and guard
against the ‘reasonable grounds’ test
• Training required to enable staff to take a risk
based approach to their work.
Remember “Firms should encourage their staff
to ‘think risk’ as they carry out their duties…..”
(Preface 18)
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Electronic Verification
• Who to use?
• What to do and how to do it?
• Existing providers and others
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Reliance on Other Regulated Firms
• Efficiency?
• Several different firms involved on same business
• Acceptable confirmations:
• Assessment of source and acceptability
• Exceptions
• The confirmation and the supporting documentation
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Impact of the New Guidance
• How has the FSA’s position changed:
• Rulebook
• Monitoring
• Philip Robinson’s letter
• Staff Training
• Management of levels of discretion allowed to staff.
• Implementation challenges
• Time
• Cost
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Action Required Now
• Assessing and documenting risk profiles for
sign-off by senior management
• Determining additions and revisions to
existing systems, processes and controls
• Determining revised staff training needs and a
strategy to meet the needs on a timely basis
• Monitoring and reporting back to senior
management through project management
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Ongoing Requirements
• Monitoring compliance with all aspects of the
new AML/CTF regime
• Monitoring changes to risk assessments and
the consequences thereof
• Routine reporting to senior management, both
in accordance with the requirements they have
determined and the formalised annual MLRO
report.
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Significant Dates
• Final Guidance published 1st February 2006
• Treasury approval given 13th February 2006;
Guidance now has ‘approved status’ in law.
• Abandonment of FSA ML Sourcebook and full
effect of new regime from 1st September 2006
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The New JMLSG 2006 Guidance
Session End
MARCH 2006

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