GOOD & BAD PRACTICES - AML/CFT BRAs & STRATEGIES  

During the second quarter of 2022, the JFSC undertook a thematic examination to assess the extent to which supervised persons [including DNFBPS] have undertaken and recorded an assessment of their exposure to financial crime risk and documented a resulting strategy to counter it.

In the paper, the following Good and bad practices are highlighted.

BAD PRACTICE:

1. The biggest issue identified was a lack of Board engagement, characterised by
   • delegation,
   • non-attendance at meetings about the BRA,
   • inadequate Board discussion and
   • records of approval.
2. Inadequately defined risk appetite for the business.
3. Inadequate risk assessment,
   • cut from other parts of the group,
   • is not Jersey-specific, doesn't deal with known Appendix D2 and Sound Business Practice Policy risks, and
   • doesn't cover the same ground that the senior managers mention in their JFSC interviews.
4. Systems and controls
   • not appropriately designed to mitigate the risks identified in the BRA
   • with a lack of (or incorrect) mapping of risks to mitigation steps.
5. BRA is not kept up-to-date.
6. Policies and procedures are not in place to make the BRA available to the JFSC on request.
7. Inadequate formal AML/CFT strategy.

BEST PRACTICE

1. Systems and controls
   • Assess controls against multiple risk metrics;
   • use compliance monitoring to assess effectiveness;
   • use staff questionnaires to gauge cultural barriers.
2. Ensure the AML/CFT strategy
   • clearly and separately articulates the firm's response to each financial crime risk identified in the BRA and
   • is appropriately aligned thereto and that it is shared with employees
3. BRA
   • Set appropriate intervals and demonstrate the Board reviewing the BRA regularly;
   • agree on events that will trigger a review of the BRA and strategy;
   • ensure data used in the BRA is regularly refreshed.
4. Methodology
   • Ensure risk is assessed as a function of likelihood AND impact;
   • describe exposures and risk appetite in understandable language for employees;
   • define what risk means to the business;
   • document the methodology for assessing risk;
   • distinguish between different types of financial crime and assess risk separately;
   • horizon scan;
   • ensure residual risk is within appetite.
5. The BRA is the Board's responsibility.
   • Involve the whole Board; capture contemporaneous records of the Board discussing and approving the BRA;
   • set clear terms of reference and responsibilities when delegating the preparation of the BRA.
6. The Board's risk appetite statement must clearly articulate the risk appetite.
   • It should discuss both risks and controls, use short statements instead of long prose, be specific and quantitative, and be linked to performance metrics for Board monitoring.
7. Policies and procedures should provide that data or information will be made available to the JFSC on request.

Read more here

• https://www.jerseyfsc.org/industry/examinations/2022-amlcft-business-risk-assessment-and-formal-amlcft-strategy-feedback/

Read the paper here

• https://www.jerseyfsc.org/industry/examinations/2022-amlcft-business-risk-assessment-and-formal-amlcft-strategy-feedback/
• https://www.jerseyfsc.org/media/6243/e-2022-amlcft-business-risk-assessment-and-formal-amlcft-strategy-feedback.pdf

First Published By Comsure [3.01.2023]

https://www.comsuregroup.com/news/22-december-2022-jfsc-thematic-financial-crime-risk-assessments-and-amlcft-strategies-report-published/