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Key Elements of an Independent Review Part 1 - Policies and Procedures

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An Anti-Money Laundering (AML) Independent Review ensures compliance and identifies potential risks. Performing an Independent Review on an annual basis is not only a regulatory requirement but a key tool for determining whether the controls implemented over the past year are effective in reducing your company's AML risk.

There are three essential elements of an Independent Review:


1 - Policies and Procedures: The review should assess whether your AML policies and procedures are adequate and compliant with regulatory requirements.


2 - Internal Controls and Transaction Testing: The review should test your internal controls and transactional systems to identify weaknesses or potential issues.


3 - Training and Recordkeeping: The review should evaluate the training programs and recordkeeping to ensure they are sufficient.


While these elements do not cover all aspects of an Independent Review, they are crucial in ensuring that your company's AML program is robust and effective.


Let’s take a deeper dive into the Policies and Procedures element:


  • Comprehensive Written Policies: Your policies should detail your approach to preventing money laundering and terrorist financing. The policies must align with regulatory requirements and industry best practices.


  • Risk Assessment: The policies should include a risk assessment framework that identifies and evaluates the potential AML risks. This involves assessing customers, geographic locations, products and services, compliance, and operations.


  • Know Your Customer (KYC) Procedures: Includes verifying customers' identities, understanding the nature of their activities, and assessing the AML risks associated with them.


  • Suspicious Activity Reporting (SAR): Should outline the process for identifying and reporting suspicious activities. Including guidelines on what constitutes suspicious activity, how to report it, and the process for filing SARs.


  • Internal Controls: Internal controls should specify how to detect and prevent money laundering. This includes separation of duties, approval processes, and regular audits to ensure compliance. There should also be oversight mechanisms, such as an AML compliance officer, to manage and monitor the AML program.


  • Recordkeeping and Documentation: The procedures should include detailed guidelines on maintaining records of transactions, customer information, and reports.


  • Employee Training: Regular training should be part of the policies to ensure that employees are aware of AML regulations and know how to identify and report suspicious activities.


  • Periodic Review: Policies and procedures should be reviewed and updated periodically to reflect changes in regulations, emerging risks, and lessons learned from internal and external audits.


As we are now a month into the new year, it's not too early to schedule your Independent Review. If you are interested in discussing how Heritage Risk can assist with your next Review, please email Chris at chris.gunias@heritageaml.com.



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