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Corporate Governance / Operational Risk and The implementation of effective AML/CFT measures

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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Corporate Governance / Operational Risk and The implementation of effective AML/CFT measures

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  1. 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

  2. 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

  3. 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

  4. 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.

  5. How can we measure ML or FT Risk?

  6. 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?

  7. 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

  8. Thank you for your attention.Questions? Comments?

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