Anti-Money Laundering and Counter Terrorist Financing Country Risk Assessment Process Jason Haines Head of Financial Cri

1. Challenges for the MLRO 23rd February 2009 Anti-Money Laundering and Counter Terrorist Financing Country Risk Assessment Process Jason Haines Head of Financial Crime Prevention, Huntswood Kit Dawnay Head of AML/CFT at Aegis 1

2. Financial Crime Prevention - Challenges for the MLRO • FSA financial crime agenda 2008-9: Operational Risk and Financial Crime. • Data Security • Financial Sanctions • Risk based approach? Is your firm doing enough? • Senior Management Responsibility - a balancing act • Building a risk adverse framework - cost effective and proportionate approach. • Customer due diligence in the international spotlight 2

3. Cost Effective and Proportionate Approach to Managing AML/CTF • Identification of potential risks in the sector which the firm operates. • Assess the risks presented by the firm’s customers, products, delivery channels and geographic areas of operation e.g. initial ID and CDD verification followed by ongoing scrutiny and updating. • Design and implement controls to manage and mitigate these assessed risks. • Monitor and improve the effective operation of these controls e.g. ongoing activity monitoring. • Record appropriately what has been done and why. 3

4. In its risk assessment process, the Aegis AML team assesses six main criteria comprising its Country Anti-Money Laundering (CAML) ratings. In our approach, money laundering risk incorporates assessing: The passive vulnerability of the system and the active threat of money laundering The process of assessment relies on information collection and mathematical modelling. Anti-Money Laundering and Counter Terrorist Financing: Country Risk Assessment Process 4

5. We use six main criteria as benchmarks. Three are vulnerabilities: Quality of regulation Transparency of institutions Quality of supervision and enforcement Three are threats: The prevalence of organised crime Corruption Propensity to money laundering/terrorist financing Risk assessment

6. The process • Aegis’ emphasis is on information gathering – doing the digging • primary sources government officials and diplomats financial services experts, journalists and professionals security and law enforcement officers regulators privileged sources • secondary sources FATF mutual evaluation reports UN departments the World Bank and IMF official government reporting Closed access documents 6

7. Regional risk assessment • Currently we are carrying out a regional threat assessment, contributing to the Financial Action Task Force’s (FATF) Global Threat Assessment. • Analysis of money laundering and terrorist financing in seven West African jurisdictions. • Drawing information together to establish a regional picture.

8. Overview of risk factors in West Africa • Political instability in many countries in the region • Economic and social exclusion of groups from social benefits if any • Weak and fragile economies • Bad and politicised governance, lack of rule of law, relative deprivation • Disease, poverty, hunger and abuse of human rights • Corruption/diversion of public funds, assets for other purposes Some social effects • inequality and more exclusion and deprivation, increase in poverty rate • excluded groups take up arms against the ruling class • suppression of media and civil society • break down in rule of law • rise in crime rates • organized crime, drugs/human/arms trafficking • culture of fear 8

9. Question over blacklisting process • Reliance on FATF blacklisting process, but: • The process has become politicised: Sao Tome and Principe • Questions have arisen over its effectiveness: OECD on harmful tax havens • Nuance is lacking: • Ghana – FIC in intelligence • Nigeria – NFIU in EFCC • Cote d’Ivoire – CENTIF in Ministry of Finance 9

10. Increasing role in importing cocaine MV Benjamin seizure in Ghana Complete loss of Guinea Bissau to cocaine Is the money coming back through West Africa? Some countries provide stable investment environment Lax AML/CFT standards Real estate especially vulnerable Corrosive impact on state integrity Weakness of state structures Corruption Drugs in West Africa

11. Drugs in West Africa For example: Ghana: address system lacking, at same time as emergence of offshore financial system. Nigeria: corruption at all levels but varies: police, attorney general have reputation for serious corruption. Impact on neighbouring jurisdictions. Senegal: money laundering carried out by family members or associates of president, combined with the politicisation of AML/CFT process. Cote d’Ivoire: presidential family linked to CFA counterfeiting ring, linked to terrorist financing; sanctions enforcement against Charles Ble Goude, leader of the Young Patriots, is laughable – banks complicit.

12. Conclusion • Information is key when making decisions: banks with a presence in the region are in good position to judge (and may come under pressure), but those with little contact most at risk: • either of permitting money laundering • or of turning away business unnecessarily • Thank you

13. Aegis Research and Intelligence is a strategic advisory and business intelligence consulting company. We offer five broad types of service: • Pathfinder Services • Geopolitical Risk Analysis • Maritime Risk Assessment • Corporate Due Diligence • Strategic Risk Assessment • Huntswood is a consultancy offering expert advice on strategic compliance, risk analysis, sanctions and money laundering. • Health checks • Protect your assets, reputation and client base • Satisfy the Regulator • Consistent, audited approach to monitoring • Connect transaction monitoring to your CDD approach Huntswood First Floor, 43-44 New Bond Street Mayfair, London W1S 2SG Tel: +44 870 794 0794 Tel: +44 7795 814816 Jhaines@huntswood.com www.huntswood.com Aegis Research & Intelligence 39 Victoria Street, London SW1H 0EU, UK Tel: +44 20 7222 1020 Fax: +44 20 7222 1022 www.aegisworld.com Company Registration No: 04541965 VAT No: GB 802 6924 38 13