1. Caribbean Indigenous Banks Anti-Money Laundering Survey
An analysis of the local challenges
Patricia Hamilton
CEO Caribbean Association of Indigenous Banks Inc.

2. An Integrated Approach
Compliance Requirements
International, Regulatory, Industry, Third Party, Internal
Anti-Money Laundering Strategy
Business and organisation
Processes & Initiatives .
Investment suitability
Security & technology usage
Risk assessment
Tax etc.
Investent suitability
Know your customer (KYC) -
Account Opening
Management Commitment
Training and Awareness Program
Anti -
money laundering standards and procedures
Administrative and end -
user
policies and procedures
KYC -
Data
Transaction Monitoring/
Tactical short term
AML Reporting
Access/Mining
Tracking Processes
solutions
Cost of Compliance

3. Challenges Management Oversight and Guidance
Managing Cross-Functional Expectations (Business vs. Compliance)
IT Systems
Training
Accountability for Non-Compliance
Adequately Skilled and Sufficient Officers and Staff that understand local requirements
Operational Improvements
Enterprise-wide standards

4. Challenges: Management Support
Management Oversight and Guidance
Managing Cross-Functional Expectations (Business vs. Compliance)
IT Systems
Training
Accountability for Non-Compliance
Adequately Skilled and Sufficient Officers and Staff that understand local requirements
Operational Improvements
Enterprise-wide standards

5. Management Support
AML is a key value; a function of the integrity of the company and as such must be promoted by directors and management. Key values are supported by management behavior: - Visible attention and appreciation - Agenda item in board meetings - Element of staff assessments - Available budgets for IT, training etc. - Status & powers of the AML officer

6. Most consider management to be supportive.
The “tone on top”
Most consider management to be supportive.

7. Challenges: Business vs. Compliance
Management Oversight and Guidance
Managing Cross-Functional Expectations (Business vs. Compliance)
IT Systems
Training
Accountability for Non-Compliance
Adequately Skilled and Sufficient Officers and Staff that understand local requirements
Operational Improvements
Enterprise-wide standards

8. Centralized vs. Decentralized Compliance Function
Advantages
Limits differing interpretations
Limits data entry error
Quality Control is easier
Disadvantages
Skills required of staff
Backlog
Decentralized
Advantages
Skill set applied to entry
Disadvantages
Quality Control
Enforcement

9. Management of AML efforts should come from throughout the organization
Establish a “culture of compliance”
Set tone at the top
Top management is ultimately responsible for compliance
Business is responsible for day-to-day compliance
Compliance management plays a key role in corporate governance, monitoring and advisory functions

10. Centralized vs. Decentralized

11. Challenges: Technology
Management Oversight and Guidance
Managing Cross-Functional Expectations (Business vs. Compliance)
IT Systems
Training
Accountability for Non-Compliance
Adequately Skilled and Sufficient Officers and Staff that understand local requirements
Operational Improvements
Enterprise-wide standards

12. Technology as a compliance enabler
Rules Refinement
Customer Profiling
Manual
Workflow
Where most Caribbean banks are
Enterprise Profiling
Integrated Organization
The above maturity model depicts how Compliance systems can evolve
Advanced Monitoring

13. Just above half report adequate manual & technological support.
Support systems
Just above half report adequate manual & technological support.

14. Use of Technology for AML
77% have either invested or have plans to invest in the future.

15. Capabilities of Transaction Monitoring Software
A= Client Profiling
B= Transaction Profiling
C= Historic Client Behaviour
D= Pattern Recognition of Transactions
E= Peer Grouping
F= All of the Above
Most respondents report that their transaction monitoring system has all 5 features.

16. Reviewing Transaction Monitoring software for gaps

17. Impact of Software

18. Challenges: Training Management Oversight and Guidance
Managing Cross-Functional Expectations (Business vs. Compliance)
IT Systems
Training
Accountability for Non-Compliance
Adequately Skilled and Sufficient Officers and Staff that understand local requirements
Operational Improvements
Enterprise-wide standards

19. Training: Critical components
Policies and values of the company
Laws and Regulations
Laundering Strategies
Communication skills (KYC)
Management discussion

20. Caribbean Financial Action Task Force

21. Challenges: Accountability
Management Oversight and Guidance
Managing Cross-Functional Expectations (Business vs. Compliance)
IT Systems
Training
Accountability for Non-Compliance
Adequately Skilled and Sufficient Officers and Staff that understand local requirements
Operational Improvements
Enterprise-wide standards

22. Accountability- A necessity
The key challenge for many financial institutions is to sustain the effectiveness of their AML programs on an ongoing basis.
An AML Accountability Review addresses issues related to corporate risk management and the legal liability of corporate directors, officers, supervisors and staff in managing the reporting cycle for suspicious transactions.

23. Regulatory Bodies Governing
Countries
Regulatory Bodies
Barbados
Financial Intelligence Unit
Cayman Islands
Cayman Islands Monetary Authority
Financial Crimes Unit
Portfolio of Legal Affairs
Cayman Islands Stock Exchange
Jamaica
Financial Investigations Division (Ministry of Finance & Planning)
Trinidad & Tobago
Financial Investigation Unit
Eastern Caribbean states
Eastern Caribbean Central Bank
National Anti-Money Laundering Committee
Office of National Drug & Money Laundering Control Policy
Guyana
Finance Intelligence Unit
Suriname
Meldpunt ongebruikelijke
Laws governing include Barbados: Money Laundering and Financing of Terrorism (Prevention & Control) Act Cap. 129, Proceeds of Crime Act Cap. 143, Mutual Assistance in Criminal Matters Act, Cap. 140A, Anti-Terrorism Act , Anti-money Laundering/Combating Terrorist Financing Guidelines; Cayman Is.: Misuse of Drugs Law (2000 rev), Proceeds of Criminal Conduct Law (2005 rev), the Money Laundering (Amendment) Regulations 2007, The Guidance Notes on the Prevention and Detection of Money Laundering in the Cayman Islands (2007 rev), The Terrorism Law 2003; ECCB: AG-International business Corporations Act, Money Laundering (Prevention) Act; Prevention of Terrirism Act, Tax Information Exchange Act, Money Laundering (Prevention) Regulations, Money Laundering Prevention Guidelines, Mutual Legal Assistance Treaties, Gaming Regulations, SLU-Drugs Prevention & Misuse Act 22 of 1993, Proceeds of Crimes Act 10 of 1993, Money Laundering (Prevention) (Amendment) Act 15 of 2004 SVG-The Proceeds of Crime and Money Laundering (Prevention) Act of 2001 S-N-A-Proceeds of Crime Act 16 of 2000, Anti Terrorism Act, No 21 of 2002, Anti-Money Laundering (Amendment) Regularions, 200s, Anti-Money Laundering Regulations, 2001, Financial Intelligence Unit Act, 2000, Financial Services (Exchange of Information) Regularions, 200s, Financial Services Commission Act, 2000, Guidance Notes on the Prevention of Money Laundering, Organised Crime (Prevention 7 Control) Act, 2002; Guyana: Money Laundering (Prevention) Act 2000 (to be superceded by Anti-Money Laundering & Countering the Financing of Terrorism Act pending); Jamaica: The Proceeds of Crime Act 2007, Terrorism Prevention Act; Trinidad&Tobago: The Proceeds of Crime Act, 2000, The Anti-Terrorism Act, 2005; Suriname: Crime Act

24. Familiarity with consequences for breaches
Most staff are considered to be familiar with consequences for breaches.

25. Challenges: Human Resources
Management Oversight and Guidance
Managing Cross-Functional Expectations (Business vs. Compliance)
IT Systems
Training
Accountability for Non-Compliance
Adequately Skilled and Sufficient Officers and Staff that understand local requirements
Operational Improvements
Enterprise-wide standards

26. How do we rank?
Experience in other jurisdictions shows that a common problem is a lack of skilled and experienced staff with anti-money laundering expertise. How do we rank?

27. Numbers of staff dedicated to AML
Most banks employ 1-5 staff whose primary duty is AML. The majority of these are responsible for Transaction Monitoring.

28. The skill-set of staff
Although in small numbers, staff are considered to be adequately skilled in AML & CFT.

29. Challenges: Operations
Management Oversight and Guidance
Managing Cross-Functional Expectations (Business vs. Compliance)
IT Systems
Training
Accountability for Non-Compliance
Adequately Skilled and Sufficient Officers and Staff that understand local requirements
Operational Improvements
Enterprise-wide standards

30. The ideal operational infrastructure
Governance
Maintenance
Account / Transaction
Monitoring
Policy & Procedures
Risk Assessment
Organization & Controls
Threads
Risk Profile
People
Process
Record Keeping / Retention
AML
Regulatory
Requirements
Technology
Reporting
Structure
Testing
Training / Testing

31. Budgetary Expenditure
33% have spent over US $100,000 on Transaction Monitoring.

32. Specific Use of Budgetary Funds
A= Increase in staff
B= Enhancements to existing transaction monitoring system
C= Implementation of automated transaction monitoring system
D= Training
E= Conferences
F= Other
Most respondents reported a combination of methods B, D & E.

33. Methods for indentifying suspicious activity
Least
Used
A= Reliance on employees’ vigilance
B= Review of exception reports
C= Internally developed transaction systems/exception reports
D= Vendor supported automated transaction monitoring system
Most respondents (28%) reported a combination of methods A, B & C while 17% reported using all four methods.

34. However, 50% of these apply only to the Compliance department.
Policies & Procedures
However, 50% of these apply only to the Compliance department.

35. To conclude…

36. Essential Elements of Effective AML
Management support, commitment, accountability, “tone at the top”
2. Effective governance structure to oversight line of business functions
3. Comprehensive and actionable policies and procedures to reflect global and country specific requirements
4. Appropriate compliance communication, awareness, reporting, and education plan
Process to identify and implement regulatory requirements timely and effectively

37. Essential Elements of Effective AML, cont’d.
Monitoring/self-assessment programs to effectively detect violations and weak control systems
Reporting and communication processes to ensure the status of significant compliance issues are communicated
Tracking process for corrective actions required due to results from monitoring programs, complaints, Internal Audit, and regulatory reports
Effective training programs
10. Involvement of compliance function in the development of new products and services

38. Questions?

39. Caribbean Indigenous Banks Anti-Money Laundering Survey
An analysis of the local challenges
Patricia Hamilton
CEO Caribbean Association of Indigenous Banks Inc.