Dr AML: Alice Tregunna, CEO, The TIC Company
There was a frenzy of activity recently as the Pandora Papers hit the news networks, and media outlets ran with the latest exposé on the financial secrets of billionaires, politicians and prominent figures from around the world.
Many of the secrets revealed were not in themselves illegal but they shined a light on some questionable behaviour, and showed how New Zealand can be exploited. An exploitation which occurs because of the ease with which you can set up opaque structures via New Zealand, which is further exacerbated by the lack of a beneficial ownership or trust register.
For a long time New Zealand has been seen as a desirable place to do business – desirable not only because of our expertise but also because we are naïve, easy, and open to exploitation. With Pandora being yet another paper highlighting our failings, what’s next? When are we going to get all aspects of our AML compliance sorted so we can help prevent this exploitation?
Here we shine our own light on AML compliance programmes and what Pandora has shown us.
5 ingredients of an AML compliance programme
A robust programme can help with some of the issues highlighted by Pandora but we may need to go beyond the basics. Every compliance programme should at least cover the following elements:
1. Create a customer due diligence framework
Customer due diligence is the cornerstone of AML compliance and it builds up your understanding of your client base - supporting your broader KYC processes..
It is important to get this right to ensure you are applying an appropriate level of CDD checks on your customers.
2. Commit to compliance
Show how you handle risks and approach customer due diligence. Document how you identify material change in the nature or purpose of a business relationship with customers.
Know your customer
Show what customer information you use to conduct CDD and how you verify that information. Document the process you use to determine what type of CDD needs to be carried out (do you need to do standard, simplified or enhanced customer due diligence), and demonstrate how you incorporate CDD into your onboarding and account opening process.
If you do have to carry out enhanced customer due diligence on a client, show how you’ll obtain information on their source of funds and/or source of wealth and how you would establish whether a customer or beneficial owner of a customer is a Politically Exposed Person (PEP).
Allocate roles and train staff
Show how your senior management approves establishing and continuing business relationships with a PEP, and show how your staff are trained and well-informed to deal with CDD processes and understand AML definitions such as ‘beneficial owner’.
3. Record findings
Ensure your programme has policies and procedures in place to properly examine and store findings on any activity that might be related to money laundering. This includes ‘complex or unusually large transactions and unusual patterns of transactions with no obvious economic or lawful purpose.’
Also state in your programme how you will ‘monitor, examine, and keep written findings relating to business relationships and transactions with countries that do not have or have insufficient AML/CFT systems in place.’ These activities