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.
- The biggest issue identified was a lack of Board engagement, characterised by
- non-attendance at meetings about the BRA,
- inadequate Board discussion and
- records of approval.
- Inadequately defined risk appetite for the business.
- 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.
- 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.
- BRA is not kept up-to-date.
- Policies and procedures are not in place to make the BRA available to the JFSC on request.
- Inadequate formal AML/CFT strategy.
- Systems and controls
- Assess controls against multiple risk metrics;
- use compliance monitoring to assess effectiveness;
- use staff questionnaires to gauge cultural barriers.
- 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
- 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.
- 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.
- 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.
- 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.
- Policies and procedures should provide that data or information will be made available to the JFSC on request.
Read more here
Read the paper here
First Published By Comsure [3.01.2023]
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