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Disclaimer: The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management. Corporate Governance / Operational Risk and The implementation of effective AML/CFT measures
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Disclaimer: The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management. Corporate Governance / Operational Risk and The implementation of effective AML/CFT measures Terence Donovan, Financial Integrity Group, Legal Department, IMF March 2009
Impact of current difficult environment • The IMF is working with the committees of the G20 and the Financial Stability Forum (FSF) to seek solutions to the current crisis. • Many risks are currently elevated, including abuse of financial system by money launderers – why? • Reputations are being damaged – vigilance & good governance are needed in defence
Corporate Governance – key to effective control • The ‘tone from the top’ determines the quality of internal controls; • AML/CFT should not be disconnected from core governance/internal controls – important to integrate it; • Key roles in AML/CFT of Board of Directors; Audit Sub-Committee; Compliance function & MLRO
AML/CFT and Operational Risk • While views vary of the scope of operational risk, components relevant to AML/CFT failings include: • Reputational risk; • Legal risk; • Financial risk • Minimizing risk of abuse for ML or FT needs to be built into organizational and internal control structure.
Three high level risk events: • That ML or FT activity will be attempted. • In your jurisdiction/financial institution, what are the main vulnerabilities? • That, if attempted, institutions will not detect it or act upon it; • In your financial institution, what are the main weaknesses? ….perhaps not knowing ‘natural person who is ultimate beneficial owner’? • That, if detected and acted upon by financial institutions, the ML or FT activity is not acted on appropriately by the authorities. • In your jurisdiction, how effective is the overall system?
Effective AML/CFT implementation requires: From the authorities…. • Strong political commitment • Coordination among the relevant authorities • International cooperation and information exchange. From each financial institution • Commitment from the board and management • Effective internal controls – ‘Know your customer’ • Close cooperation with the authorities