Solving the MLROs' Problems
Mike Sturgess, Managing Director of SWATUK, discusses anti-money laundering compliance issues with MLROs and often gets the response that they feel the firm is broadly complying with the regulations. However, as you start to ask specific questions the answers given tend not to support that initial “gut feeling”.
So what are these specific questions? Imagine that you have just pulled one hundred clients’ files at random from your system.
- The regulations have made a risk-based approach mandatory. Would you find a risk assessment on all 100 clients?
- As part of your due diligence procedures you need to have adequate evidence to confirm the existence of any entity and the names of all principals / key decision makers. Would you have that on all files? Would you have adequate ID in place for the key players on all files?
- You also need to know who the clients’ beneficial owners are and then, on a risk-based approach, confirm their identity. Do you know who the beneficial owners are in all cases, including clients owned by offshore trusts or companies? Do you have adequate proof of ID in place?
- In order to facilitate ongoing monitoring of clients’ transactions you must have sufficient “know your client” information to allow staff to differentiate between normal and suspicious transactions. Do all files have this?
- The regulations require you to train staff on the regulations and relevant legislation and to provide regular training on recognising and dealing with suspicious transactions. Can you demonstrate that you have met this initial and ongoing training requirement for all staff? Would you know if one or more individuals have not been trained?
- You need to tailor your firm’s policies and procedures to reflect the specific risks faced by your business. Have you done so, and are all staff aware of those policies and procedures?
- You need to ensure that you do not act for someone on the Treasury’s sanctions list and to manage the risk that you are acting for a politically exposed person. Can you demonstrate that you do this?
- Do you have systems in place to review the information that you have for clients and make sure that it is kept up to date? If “yes”, do you know that the system is being applied to all clients?
- If you did not answer “yes” to all these questions, can you identify which clients or members of staff are compliant, and which are not?
In truth, most MLROs would answer “no” to most of these questions? Whilst they accept that not all clients will be compliant, they have virtually no idea which clients are and which are not.
After the new regulations came into force in December 2007 it soon became clear that most firms were in the position described above. SWATUK therefore started work with BHIS Limited to develop a software solution called Anti Money Laundering Compliance Plus. This gives MLROs the tool to answer “yes” to all the above.
As SWATUK talked to interested parties during the development phase, they were asked if the software could incorporate a cost effective electronic verification system that didn’t require purchasing a minimum number of checks each year. They are pleased to announce that in partnership with the GB Group it does exactly that.
It can also connect to Companies House and provide a free “mini” search, confirming the name and address of the company. When setting up a new company client, you simply enter the registered number and the software grabs the name and address from Companies House.
Each year, SWATUK receive hundreds of calls from clients asking what they to need to do to satisfy the customer due diligence requirements for a particular client. With three different risk levels, fifteen different types of client and twenty three different types of evidence the software uses a matrix of 424 combinations, but only presents you with the handful of options that apply to each particular client type for the selected risk profile.
Each client and person has a highly visual system of symbols. If a client has a green tick then everything beneath that client (ID for the entity and persons, know your client, and review dates) are all in order.
Conversely, if one of them is incomplete or out of date the client shows a red cross. Simply click on the cross to drill down and find the problem. The yellow light bulb warns that a client is approaching a review date. The yellow triangle is an alert – you’ve done the checks but are unhappy with something. The red circle with a cross on it warns that the client is “on hold”. The head and shoulders symbol warns that you are dealing with a politically exposed person.
So, what else does it do?
- It can import records of clients and persons via a CSV file. If you use BHIS’s company secretarial software, PC Share Register Plus, it fully integrates with AML Compliance Plus, so that all the relationships etc are brought across.
- You can attach files (e.g. copy passports) or scan and attach documents. The electronic searches are automatically attached to the client’s record.
- You can download and search the latest Treasury sanctions list for your client at the click of a button. You can also download from the Internet and search the regulations and a range of guides published by the key supervisory bodies.
- The software allows staff to raise a suspicious activity report. Of course, staff can only see their own reports whilst MLROs have full access. The MLRO is emailed to notify him or her of a new report. The system then tracks the progress and records whether the report was passed on to SOCA or not.
- You can track money laundering training and identify anyone who hasn’t had any training during the year.
- AML Compliance Plus controls staff declarations (that they have been trained and they understand and will comply with the firm’s policies).
- The system includes an annual compliance check for the MLRO to complete.
- The software includes detailed help files and provides expert help, hand-holding and "wizards" to help you achieve compliance.
- It also includes a staged implementation wizard to help you bring your clients up to date over a period, rather than facing a sea of red crosses on day one!
- Finally, the MLRO can tailor the software to meet the firm’s individual needs. So you can decide on the normal review periods, whether you want to include staff declarations and KYC records (and if so, whether to use the accountants’, solicitors’, surveyors’ or other firms’ version.
For more details and a free evaluation copy of the software, email membership@the2020group.com.
