Enforcing Anti-Money Laundering Compliance * Getting Serious

Report
“Enforcing Anti-Money
Laundering Compliance –
Getting Serious with Penalties
and Sanctions”
Presented by The Bahamas Association of
Compliance Officers (BACO)
Understanding Sanctions
Yolanda M. Hilton
Compliance Director/MLRO
Intertrust (Bahamas) Limited
Enforcing AML Compliance with sanctions
Sanctions are:
• measures to inspire a change in behavior of
country/jurisdiction, individuals, entities, or activities;
• apply pressure on a country/jurisdiction, individuals or
entities to comply with set objectives set by the
international community;
• used as an enforcement tool when diplomatic efforts
have failed to bring about international peace; and,
• used to prevent and suppress the financing of terrorists
and terrorist acts.
Enforcing AML Compliance with sanctions
Who monitors Sanctions:
• For Compliance Officers, the prevention of breaches of
sanctions is a very important and one of the most
demanding part of the job.
• It requires Compliance Officers to be vigilant with
their monitoring and to ‘Know Your Customer’.
• As it is a regulatory requirement for entities to combat
money laundering and terrorist financing, being able
to identify blacklisted countries and individuals is key
to avoiding sanctions breaches.
Enforcing AML Compliance with sanctions
• An organization must have a robust anti-money
laundering and terrorist financing regime along with a
robust sanctions compliance control framework.
• To ensure that your sanctions compliance control
framework is robust, compliance officers must
understand their products and services offered to their
clients/ customer.
• Compliance officer must be able to identify areas that
may be vulnerable to sanction breaches and set
controls in place to mitigate against sanctions risks.
Enforcing AML Compliance with sanctions
What are the tools:
•
•
•
•
•
•
•
OFAC sanctions program specifically comprise:
Specially Designated Nations List
Counterterrorism sanctions
Counter narcotics-trafficking sanctions
Non-proliferation sanctions
Cuba sanctions
Iran sanctions
Enforcing AML Compliance with sanctions
• For a Compliance Officer, adherence to OFAC is one
of the most important tasks, as banks have to either (i)
clear US dollars or (ii) transact business in US dollars,
or with US subsidiaries, branches or operations each
day;
• Compliance with OFAC is required by all US persons,
all persons and entities physically present in the US,
all US incorporated entities and their foreign
branches, all US-origin goods, all US –origin transshipments.
Sanctions Violations
Fareda Sands
Senior Compliance Officer, UBS (Bahamas) Limited
Enforcing AML Compliance with sanctions
Who enforces Sanctions:
•
•
•
•
United Nations Sanctions
US Office of Foreign Asset Control (OFAC) Regime
UK HM Treasury regime
Local sanctions laws
Enforcing AML Compliance with sanctions
• The use of the US Dollar automatically engages OFAC
regulations.
• Therefore, banks must implement strict policies which
incorporate OFAC’s sanctions regime as OFAC
imposes aggressive financial penalties for breaches.
• Failure to comply with OFAC sanctions regime opens
up banks and individuals to legal action.
Enforcing AML Compliance with sanctions
•
•
•
•
•
•
OFAC Fines:
Banks and individuals can be hit with criminal and civil penalties
for non-compliance with OFAC regulations.
Civil penalties: from $250,000 (or twice the amount of the
underlying violating transaction) to $1,075,000 per violation.
Criminal fines from $50,000 to $10,000
E.g. Violating the Cuban embargo can cost a financial institution
the following:
Criminal: $1,000,000 in fines for companies
$250,000 for individuals
Civil: up to $65,000 fine per violation
Violating the guidelines can also lead to prison time for
executives.
Sentences vary based on the program, but willful violations may
lead to 10 to 30 years of imprisonment.
Enforcing AML Compliance with sanctions
• 20 August, 2014, the Scotsman published that
Standard Chartered Bank had agreed to pay NY
regulator a penalty of $300 million for failing to
improve its money laundering controls.
• What went wrong?
• It was established under the settlement that the bank
had failed to detect many potentially high-risk
transactions originating from Hong Kong and the
United Arab Emirates. It was alleged that they had
worked with the Iranian government to launder $250
billion from 2001-2007
Enforcing AML Compliance with sanctions
• June 30, 2014, authorities imposed a fine of $9bn on
BNP Paribas for transferring dollars on behalf of
countries subject to sanctions.
• This was based on $30bn of transactions processed
between 2002 and 2009 to Sudan, Iran and Cuba. The
man offences appear to be transactions processed for
Sudanese oil exports.
Enforcing AML Compliance with sanctions
• May 2014 – Credit Suisse was fined $2.6bn for helping
US citizens evade tax, which they pleaded guilt
• December 2012 – HSBC’s penalty for sanctions was
$1.9bn for money laundering offences largely
involving Mexican drug barons.
• US banks have also faced a number of heavy penalties,
including JP Morgan, which reached $13 bn.
settlement over the sale of home loan bonds.
AML Compliance Program to
avoid Sanction Enforcement
Christine Archer
Regulatory Compliance Manager
Scotiabank (Bahamas) Limited
Enforcing AML Compliance with sanctions
• To prevent money laundering, terrorist financing and
human smuggling, a company must have a compliance
unit/department which is adequately resourced, skilled
and competent.
• Downside to all of this compliance - is that the
monetary and administrative costs are high, however,
the cost of not getting it right is even higher.
Enforcing AML Compliance with sanctions
Enforcing AML Compliance with sanctions
• a robust anti-money laundering and sanctions regime
is key to mitigate against penalties and fines.
• Similarly to conducting a money laundering risk
assessment, firms may wish to conduct OFAC risk
assessments to understand their level of vulnerability
to non compliance with OFAC.
•
Enforcing AML Compliance with sanctions
• Should identify the customer which poses a higher
money laundering/terrorist financing /sanctions risk
along with the types of products and services which
also pose such high risks
• A risk based approach should be applied to all
considerations when evaluating money
laundering/terrorist financing and sanctions risk
• Identify High Risk Transactions
• Establish an effective investigative process
• As part of the annual Money Laundering/terrorist
financing/ sanctions training this should be carried out
based on the level of the staff and their responsibilities
Enforcing AML Compliance with sanctions
• As part of the annual Money Laundering/terrorist
financing/ sanctions training should be carried out
based on the level of the staff and their responsibilities
• Select staff for the investigative unit with different skills
and experiences that are useful to AML/ATF/sanctions
monitoring:
 relevant industry/product knowledge
 Understanding of applicable Anti-money
laundering/terrorist financing/sanctions risks
Enforcing AML Compliance with sanctions
• Monitor non-finance sectors which are susceptible to
money laundering, terrorist financing, human
smuggling activities.
• Communicate new and emerging threats or changes to
sanctions policy via the appropriate channels to ensure
that all staff are kept up to date.
• Must have strong internal controls – compliance starts
from the top as in BNP Paribas “senior executives at
the bank knew of the activities”.
• Shareholders must be active . At the same time, boards
must set the tone for creating a compliance culture.
• Laws have to remain up to date, possess sufficient
deterrence and facilitate international cooperation if
we are to prevent criminal activities taking part in our
financial sector.
Enforcing AML Compliance with sanctions
• Recently in Singapore (July 7, 2014) Parliament
passed amendments to laws allowing the Government
to deal more swiftly with criminal operations and
derive perpetrators of their illicit gains – as a means to
dampen transnational money laundering activities.
• Some of the changes included increasing the maximum
penalty for money laundering from 7 to 10 years in jail
and lowering the threshold for cross-border cash
reporting by a third.
Enforcing AML Compliance with sanctions
• Let me conclude by saying that the key to compliance is
that it should be reasonable for all licensees to
preserve the integrity of the Bahamian financial sector.
• From the words of James Cole, US Deputy Attorney
General, referring to BNP Paribas and the role of
shareholders:
• “ the $9bn that’s walking out of the door today is your
money. Until shareholders demand from their boards
that those boards choose leaders that create a healthy
culture of compliance, the money will keep walking out
of the door”.
“Enforcing Anti-Money Laundering Compliance –
Getting Serious with Penalties and Sanctions?”
QUESTIONS
THANK YOU

similar documents