What is the Role of the Compliance Officer?
29 May 2015, Bachir El Nakib (CAMS) Senior Consultant Compliance Alert LLC
Businesses that are regulated by the Money Laundering Regulations must appoint what’s known as a ‘nominated officer’. The nominated officer must be someone in the business. You must act as the nominated officer yourself if you’re a regulated sole trader with no employees.
This guide explains how to appoint a nominated officer and what their role is in your business. It also explains how to train your employees to work with your nominated officer in identifying and reporting suspicious activities.
The role of the nominated officer
Your nominated officer’s role is to be aware of any suspicious activity in the business that might be linked to money laundering or terrorist financing, and if necessary to report it. They’re responsible for:
· receiving reports of suspicious activity from any employee in the business
· considering all reports and evaluating whether there is - or seems to be - any evidence of money laundering or terrorist financing
· reporting any suspicious activity or transaction to the FIU by completing and submitting a Suspicious Transaction Report.
Other responsibilities you might give your nominated officer
You might decide to make your nominated officer responsible for other tasks that need to be done to make sure your business complies with the regulations. For example, you could make them responsible for:
· putting in place and operating anti money laundering controls and procedures
· carrying out money laundering risk assessments
· record keeping
· training staff in preventing money laundering
Larger and more complex businesses must appoint a member of the board or senior management to act as a compliance officer and will be responsible for your compliance obligations.
Who you can appoint as your nominated officer
Your nominated officer for anti money laundering must be someone in your business or organisation. They have a very important role, so it’s wise to appoint someone who:
· can be trusted with the responsibility
· is senior enough to have access to all your customer files and records
· can decide independently whether or not they need to report suspicious activities or transactions - a decision that could affect your customer relations
The role of nominated officer should not be held by an external consultant.
Money service businesses and trust or company service providers
The nominated officer must also pass the fit and proper test if your business is a money service business or a trust of company service provider. Money service businesses include businesses like bureaux de change, money transmission businesses and cheque cashers.
If the nominated officer is away
You can temporarily delegate the nominated officer’s responsibilities to someone else if they are absent. This doesn’t relieve the nominated officer of their overall responsibility.
You must make alternative arrangements in the business to cover for times when the nominated officer is away. It’s recommended that you appoint an alternative officer or deputy. Make sure that all your staff are aware of the alternative arrangements and know when to use them.
Training your employees to comply with the Money Laundering Regulations
You must make sure any employees are aware of the laws covering money laundering. In particular, employees who deal with customers - including receptionists and anyone who answers the telephone - should receive regular training to make sure your business complies with the regulations.
You should train employees on how to recognise suspicious transactions and what to do if they identify them. They should understand how your anti-money laundering policies and procedures affect them. You must have your anti-money laundering policies, controls and procedures written down and available to all your staff.
Make staff aware of the penalties for committing offences under the Money Laundering Regulations and related legislation.
Examples of good practice when you train your employees
Important examples of best practice in employee training include:
· making sure all employees know who the nominated officer is and what they’re there for
· giving employees clear guidance on spotting suspicious activity and reporting it to the nominated officer or their deputy
· explaining clearly the steps your business has taken to make sure it’s not used for money laundering or terrorist financing
· writing down all anti-money laundering policies, controls, procedures and risk assessments, and giving employees access to them at all times - written policies also help to demonstrate that your businesses takes its obligations under the Money Laundering Regulations seriously
· encouraging employees to refer to your written documents whenever they need to, and to get more guidance if they need it
· making sure employees know where to go for more help or information about the Money Laundering Regulations
You must keep a record of all the training your employees receive. Getting employees to sign and date the log can help emphasise just how important it is that they follow their training at all times. An up-to-date training log also demonstrates that your business is giving its staff the money laundering training they need.
Evolving the AML Compliance Officer into a Technology Expert
Stepping outside their comfort zone, AML Compliance Officers will certainly want to hire specialists in each of these areas to work on their teams and potentially lead dedicated AML Operations and AML Technology teams. At the same time, AML Compliance Officers need to be proficient enough in each area to be able to understand the larger picture and make decisions. Since AML Compliance Officers have always managed teams (which have continued to grow in size), the operations area is less of a stretch for them. Instead, it is technology that is the greater unknown. Understanding financial technology (FinTech) and regulatory technology (RegTech) has become important several ways: 1) understanding the myriad of RegTech solutions that can help AML Compliance programs work more efficiently and effectively; 2) understanding how to manage the risk of the increasing numbers of FinTech customers; and 3) understanding how to monitor new technologies and related products for suspicious activity.
- Understanding How RegTech Solutions Can Improve Efficiency and Effectiveness
The answer to creating more efficiency and effectiveness for an AML Compliance Program is no longer simply adding more headcount to the team. Instead, AML Compliance Officers need to consider Robotics, Machine Learning, Data Analytics, AI, and even Business Process Management solutions as a way to enhance the how well and how fast their teams complete their work. Understanding what each of these solutions can and can’t do is extremely important to selecting a solution that is fit for purpose. AML Compliance Officers need to be comfortable to innovate and embrace some of these solutions, while understanding the true capabilities of the solutions. If used properly, these technologies can allow for work to be managed more efficiently, allow analysts to focus on complex analysis rather than manual and repetitive data collection, assist in identifying hard to identify suspicious activity, and create consistency within the execution of the program.
- Understanding the Risks of FinTech and Startup Customers
The number of startups and FinTech companies continues to grow year after year. As banking customers, they pose a unique set of risks issue as they are generally still maturing and changing as a company. Accordingly, the risks that they posed when first onboarded may drastically change during the life of the relationship, as the company refines its business and expands to new customer bases. This doesn’t mean they are too risky to take on as customers, it just means that the due diligence and monitoring of them will need to be tailored to their unique and changing risks, differing from what is done for standard mature companies.
- Monitoring New Products and Technologies for Suspicious Activity
At the same time that FinTech companies are posing challenges as banking customers, they are also driving many financial institutions to innovate their own products to compete with them. While new banking channels, products, and payment abilities are great at attracting and retaining customers, likewise, they provide criminals with the opportunity to innovate how they launder money (e.g., transaction laundering). Understanding how these technologies work is essential for AML Compliance Officers and their teams to figure out how they can be used for criminal activity and how they can best be monitored for red flags. At the same time, as banks looks to provide new products/services, AML Compliance Officers are becoming more involved in the planning and decision making around those products/services to identify and plan for any AML risks as early as possible.
DO THESE CHANGES HAVE AN EFFECT ON REGULATORS TOO?
As AML Compliance Officers and their teams continue to evolve and innovate, the regulators who are examining their programs need to keep pace with their understanding of those evolutions and innovations.
As AML Compliance examiners need to not only be experts in AML compliance programs but also the risks associated with new types of customers and products, as well as the various technologies that are used to enhance the AML compliance program. By doing so, they will be more effective in identifying issues and ensuring that AML compliance programs are responsibility innovating in their approach to preventing money laundering and terrorist financing.