by clicking the arrows at the side of the page, or by using the toolbar.
by clicking anywhere on the page.
by dragging the page around when zoomed in.
by clicking anywhere on the page when zoomed in.
web sites or send emails by clicking on hyperlinks.
Email this page to a friend
Search this issue
Index - jump to page or section
Archive - view past issues
GRC Professional : GRC Spring 2012
16 GRC Professional • Spring 2012 COVER STORY Managing the risk AML/CTF programs must be commensurate with the level of risk, so a small business in a high- risk area -- perhaps involving international money transfers -- potentially could be obliged to have a more rigorous program than a larger business operating in a lower-risk area. The Wolfsberg Group, an umbrella group for 12 global banks, has been refining regulatory guidance for areas such as money laundering for more tha n a decade. Its blueprint for institutions identifies and implements measures and controls to mitigate money laundering risks, using the three most commonly used risk criteria -- country risk, customer risk, and service risk. "A risk-based approach promotes the prioritisation of effort and activity by reference to the likelihood of money lau ndering and reflects experiences and proportionality through the tailoring of effort to risk," it says. While there is no single methodology to apply these risk categories, and the parameters depend on the type of the institution or business, the size and nature of transactions, it also emphasises "know your customer". Wolfsberg points out that a jurisdiction recognised as having adequate AML standards poses less risk, generally needs less assessment than a customer that is unregulated or subject only to minimal AML regulation, or makes a large transaction. Companies publicly traded on a recognised exchange, for instance, pose minimal money laundering risks. Controls around customers not only involve frequent client contact, familiarity with a jurisdiction, including knowledge of local laws, regulations and rules, but the structure and extent of regulatory oversight will enhance the ability to assess the client. Armament manufacturers, dealers and intermediaries, cash intensive businesses, unregulated charities, and other unregulated "not- for-profit" organisations, dealers in high-value or precious jewels, accounts for "gatekeepers" such as accountants, lawyers and the use or involvement of intermediaries within the relationship, all need their own risk controls, The Wolfsberg Group says. It cites a number of measures and controls for higher-risk situations, including escalating approval for establishing an account or relationship, monitoring of transactions and increasing the levels of ongoing controls and reviews of relationships. It notes that the same measures and controls may often address more than one of the risk criteria identified so specific controls don't need to be established to target each and every risk criterion. While there is no universally guaranteed definition by either governments or institutions on whether a particular country represents a higher risk, Wolfsberg says countries subject to sanction embargoes or similar measures issued by the United Nations, for example, could pose a higher risk. Higher risk controls apply to services, particularly new or innovative services not specifically being offered by institutions but make use of their services to deliver the product and services generally intended to render the customer deliberately anonymous to the financial institution, to avoid identification and detection. Wolfsberg says while training and education plays a critical role in a risk-based approach to managing potential money laundering risks, all relevant employees must not only be aware of and understand the legal and regulatory environment Fees reflect volume and value AUSTRAC estimates 44.14 million money transactions totalling $3.91 trillion will be reported by more than 13,000 businesses in the 2012-2013 financial year to comply with the requirements of the Anti- Money Laundering/Counter- Terrorism Finance Act 2006. The cost of regulating these entities to protect the integrity of Australia's financial system is estimated to be around $32.9 million. A flat charging rate was originally proposed to recover costs from reporting entities but a more equitable formula, based on the size of a business and the volume and value of transactions, will be levied through an annual fee. A base component fee of $300 will be charged to cover the cost of AUSTRAC's help desk and the publication of guidance material but small businesses with less than five staff, sole traders, and partnerships with no employees will be exempt from this part of the fee structure because of the government's pledge to reduce regulatory burdens for micro businesses. On the other hand, businesses such as banks will pay a large entity component fee ranging from $2.3 million for those with earnings greater than $6 billion to $20,000 for earnings of between $100 million and $150 million. More than 8000 businesses enrolled with AUSTRAC as reporting entities to comply with the AML/CTF Act legislating requirements, which came into effect on 1 November 2011. It is estimated a further 5500 businesses will have enrolled by 31 October this year, the deadline for affiliates of remittance network providers to sign up. Countries subject to sanction embargoes or similar measures issued by the United Nations, for example, could pose a higher risk.
GRC Winter 2012
GRC Summer 2013