Keeping on top of anti-money laundering and countering financing of terrorism obligations.

The Financial Markets Authority (FMA) recently released its 2016 anti-money laundering and countering financing of terrorism (AML/CFT) monitoring report, with a warning that it will be stepping up its enforcement efforts in 2017. The report provides helpful guidance on a number of issues identified by the FMA.

Staff training

The FMA highlighted that while some reporting entities (REs) had provided initial training, there was a lack of ongoing training or training of new staff. REs are obliged to ensure senior managers, compliance officers, and employees who are responsible for AML/CFT related duties are adequately trained.

Governance and management

The report came with a warning to REs that failing to have adequate and effective procedures in place for oversight of AML/CFT matters from boards and senior management will be met with a stronger response from the regulator. They also emphasised the requirement to document and keep records outlining processes and decisions made.

On-going obligations

There are still some key issues with REs' ongoing customer due diligence and monitoring. The FMA found that the monitoring systems of some REs were not fit for their entity's purpose. Many REs did not have a written process for investigating alerts, and there were a lack of suspicious transaction reports.

While the FMA recognises that most pre-existing clients will not have adequate identity documentation, REs are expected to have a process in place for updating these clients' identity information.

High risk customers

Following the release of the Panama Papers, the FMA conducted a number of targeted visits to assess whether REs were complying with their customer due diligence obligations including whether the business has had any business relationship with Mossack Fonesca. It found that the quality of customer due diligence policies varied. The FMA emphasised the requirement to frequently review high-risk customers, and for management to approve when high-risk customers are taken on. Once again, this process must be well documented.

Suspicious transaction reports

The FMA showed concern about the low level of suspicious transaction reporting, which is considerably lower than REs supervised by other AML/CFT regulators. They will be implementing a targeted training regime in 2017 to combat this issue.

The FMA's report highlights that REs should be vigilant in ensuring their AML/CFT policies and processes meet their legal obligations. We can help with a review of your company's compliance policies and procedures.

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