Empowering financial institutions, employees ''On administrative sanctions, penalties of Anti-Money Laundering regime''

The implementation of the new Anti-Money Laundering, Combating the Financing of Terrorism and Proliferations of Weapons of Mass Destruction (AML/CFT&P) administrative sanctions and penalties has placed greater responsibilities on employees of financial institutions. 

It is crucial for bank employees to understand the implications of these sanctions to protect themselves from potential consequences imposed by regulatory agencies, such as the Bank of Ghana (BoG) and the Financial Intelligence Centre (FIC).

There are important aspects of AML/CFT administrative sanctions that bank employees should be aware of, thus empowering them to navigate their roles effectively and contribute to the integrity of the financial system.

Role of 3 lines of defence

To comprehend AML/CFT administrative sanctions fully, it is essential to first understand the requirements outlined in the 2022 AML/CFT&P directive published by the BoG and the FIC.

This directive establishes specific responsibilities for the three lines of defence within accountable institutions.

The first line of defence consists of customer-facing staff and process owners.

Their role is to identify and assess customer risk, implement robust KYC (Know Your Customer) procedures, and detect suspicious activities.

These employees play a vital role in safeguarding the financial institution from money laundering and terrorist financing activities.

By understanding their responsibilities and complying with the AML/CFT guidelines, they contribute to maintaining the integrity of the financial system.

The second line of defence includes departments such as, Compliance, HR, Risk and Control.

These departments provide support and guidance to ensure effective implementation of policies, procedures and training programmes. 

They play a critical role in creating a strong control environment, establishing risk management frameworks and monitoring compliance with AML/CFT regulations.

By working collaboratively with the first line of defence, these departments strengthen the institution's ability to detect and prevent financial crimes.

The third line of defence is the Internal Audit department.

This department is responsible for independently evaluating the effectiveness of the first and second lines of defence in managing AML risks. 

They provide an objective assessment of the institution's compliance with AML/CFT regulations and identify any weaknesses or gaps in the control environment.

By conducting thorough audits and assessments, the Internal Audit department helps ensure that the institution's AML/CFT measures are robust and effective.

Employee responsibilities, consequences

Every employee, regardless of their role, is the first line of defence for their respective processes and duties.

All employees have a collective responsibility to identify and mitigate AML risks within their areas of expertise.

This collective effort ensures that the institution is protected from potential money laundering and terrorist financing activities.

Customer account managers, in particular, bear significant responsibilities within the first line of defence.

They are responsible for conducting thorough Know Your Customer (KYC), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD) procedures on customers and business relationships.

These procedures involve gathering relevant information about customers, verifying their identities, assessing their risk profiles and monitoring their transactions for suspicious activities.

By diligently performing these duties, relationship managers contribute to the prevention and detection of financial crimes.

Failure to adhere to these requirements can result in severe penalties, including fines and even potential criminal liabilities for the employee.

It is crucial for employees to understand their due diligence responsibilities when establishing relationships with customers of varying risk levels, especially high-risk individuals and entities such as Politically Exposed Persons (PEPs), Non-Profit Organisations (NPOs), Money Value Transfer Services (MVTs), Forex Bureaus, Shell Banks/Companies, Cross-border correspondent banking relationships, and related high-risk businesses.

In addition to customer-related responsibilities, employees with regulatory reporting duties must also exercise extra caution.

Sanctions exist for non-submission, incomplete submission, delayed submission and inaccurate submission of information, data, statements and returns.

Each day that a default continues can lead to additional sanctions imposed on the employee.

Therefore, regulatory reporting and record-keeping obligations of employees should never be overlooked.

It is imperative for employees to diligently follow the records keeping processes and procedures laid down by the institution, ensuring accurate and timely reporting to regulatory agencies.

Proper record-keeping not only aids in compliance but also enables easy retrieval of records upon request, ensuring transparency and accountability.

Moving on to the second line of defence, there are greater consequences per the requirements of the AML sanctions.

Notably, the Anti Money Laundering Reporting Officer and the Head of the Human Capital Management Department assume significant responsibilities.

The HR head faces sanctions for key compliance failures, such as failing to conduct adequate screening during the hiring and employment processes, and neglecting to perform employee annual appraisals focused on the AML/CFT&P programme. 

It is essential for the HR head to establish processes to ensure that AML appraisals and test scores are included in employees' annual scorecards, promoting awareness and accountability regarding AML compliance.

Screening employees during the hiring process and monitoring their lifestyles after employment are crucial steps to detect any signs of involvement in activities such as fraud or cash suppression.

Failure to undertake these responsibilities can result in sanctions not only for the HR head but also for the AMLRO.

The shared responsibilities emphasise the importance of a collaborative effort between HR and AML departments to identify potential risks and maintain a strong culture of compliance.

The AMLRO, as a key position within accountable institutions, plays a critical role in ensuring AML/CFT compliance.

They may face sanctions for compliance failures, such as the failure to formulate and submit an Employee Education and Training programme, neglecting ongoing training for personnel, and failing to file Suspicious Transaction Reports (STR) or Suspicious Activity Reports (SAR). 

These sanctions underscore the significance of the AMLRO's role in implementing training initiatives, providing continuous education to employees, and promptly reporting suspicious activities to combat money laundering and related offences.

The AMLRO must also ensure effective communication and collaboration with other departments within the institution to establish a robust AML/CFT framework.

The third line of defence, represented by the Internal Audit, External Audit and related independent review parties provides independent oversight and assurance functions.

They are responsible for evaluating and monitoring the effectiveness of the first and second lines of defence in managing AML risks.

The Chief Internal Auditor, in particular, carries the responsibility of assessing the effectiveness of compliance functions.

Failure to fulfil this obligation can result in significant fines and penalties per the AML administrative sanction.
 
The writer is an Anti-Money Laundering Specialist with an interest in financial crime, employee conduct and process improvement to ensure the integrity of the financial system.

E-mail: jakings011@gmail.com

Our regular columnist, Elizabeth Ohene, resumes next week.