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• The firm is expanding into provision of complex investment and tax-avoidance services for high-net-worth individuals (HNWIs).

International Diploma in AML

All parts of the question can be answered in relation to a jurisdiction with which you are familiar.

Question

You are a newly appointed money laundering reporting officer (MLRO) at a medium-sized regulated financial services firm based in a jurisdiction of your choice.

You have been asked by the board of directors to undertake a thorough review of the AML policies, procedures and culture prevalent in the firm.

A recent regulatory visit to the firm highlighted inadequate AML systems and controls. The board members are concerned that the firm may suffer regulatory penalties or negative publicity as a result.

Before your appointment, the AML role was fulfilled by the firm`s regulatory compliance officer.

You conduct initial investigations and discover the following facts.

• The firm is expanding into provision of complex investment and tax-avoidance services for high-net-worth individuals (HNWIs).

• The board has a high risk appetite for business, particularly in jurisdictions that are listed on the Transparency International Corruption Perceptions Index as those where the levels of corruption are high.

• The chief executive officer (CEO) of the firm encourages sales techniques that may not be in the best interests of the customers. The CEO was formerly the sales director. He has introduced substantial staff bonus payments tied to new business targets. This has resulted in a corporate culture where customer due diligence (CDD) is conducted but there is a lack of enthusiasm for the process.

• The CEO has made it clear that while he appreciates that CDD must be conducted, staff should not let this unduly inhibit sales, particularly for the new HNWI customers.

• The files you examine indicate that information about source of wealth and source of funds is often basic and is rarely independently verified.

• Previously, the regulatory compliance officer (much to her annoyance) has had responsibility for AML within the firm. When interviewed she stated that she had `neither the time, nor the training to properly fulfil this role`. She commented that `the CEO is aggressive and everyone does what he says`. She further stated that had it not been for the regulatory report, the firm would not have appointed a new MLRO.

• Where a new HNWI applies to become a customer, the internal procedure is that the application has to be passed to the CEO for final sign-off. To date no HNWIs have been refused, despite the fact that many originate from high-risk jurisdictions and often have military or government connections.


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