Transcript Document

Securities & Investment Institute Risk Forum The New

JMLSG 2006 Guidance

April 2006


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


Senior Management

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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


The Risk Based Approach

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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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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


Customer Due Diligence

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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


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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



• •

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)


Electronic Verification

Who to use?

What to do and how to do it?

Existing providers and others


Reliance on Other Regulated Firms


Several different firms involved on same business

Acceptable confirmations:

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Assessment of source and acceptability Exceptions

The confirmation and the supporting documentation


Impact of the New Guidance

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How has the FSA’s position changed:



Philip Robinson’s letter Staff Training Management of levels of discretion allowed to staff.

Implementation challenges

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Time Cost


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


Ongoing Requirements

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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.


Significant Dates

Final Guidance published 1 st February 2006

Treasury approval given 13 th February 2006; Guidance now has ‘approved status’ in law.

Abandonment of FSA ML Sourcebook and full effect of new regime from 1 st September 2006


The New

JMLSG 2006 Guidance

Session End MARCH 2006