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AML: THE BIG 4 AND COMPLIANCE CONSULTANCY

amlJodi Schutze (KPMG London) discusses the approach of the Big 4 to anti-money laundering and counter-terrorist financing in the banking sector.

Speed read

The Big 4 accountancy firms have been busy in recent months working with the banking sector to improve their levels of anti-money laundering and counter-terrorist financing. But when a Big 4 firm moves into a bank, exactly what does it do? In this insightful commentary, Jodi Schutze answers the question.

Commentary

When a bank is confronted with an anti-money laundering compliance issue, it will often turn to the Big 4 for guidance and expertise, particularly where a third party independent review is required. Typically, the first step that an AML consultant would take in these situations would be to conduct a current-state assessment in order to understand the bank’s position with regards to its anti-money laundering systems and controls. A risk assessment would include a review of documentation such as policy and supporting procedures; job descriptions detailing roles and responsibilities; available data / metrics which inform senior management of monitoring activity, and key risk-owner reports (e.g. MLRO Annual report or Internal Audit Report).

The other essential component to the current-state risk assessment is to engage in interviews and meetings with key relevant staff in order to gain awareness of their understanding of the existing AML frameworks. Discussions with staff across business lines and a wide range of levels within the organisation allow for the consultant to more easily identify any inconsistencies that arise out of existing limitations or any variances in procedural expectations versus actual practice. The information obtained from both documented policies and staff interviews provide a comprehensive overview of the bank’s position with regards to its AML risk appetite, governance, and control mechanisms, among many other key areas of a complete AML framework.

Following the risk assessment, the AML consultant is then in a position to identify and articulate any gaps in documentation or actual practice by offering the bank solutions in areas that have been identified as opportunities for improvement. Identifying these gaps is done by considering the bank’s current AML practices and comparing them to regulatory standards and benchmarking them against leading business practices and industry peers. The Big 4 are generally well positioned to deliver this information given these firms work closely with local regulators and possess a wide range of experience in providing AML solutions to clients across the financial services sector.

While no anti-money laundering compliance service can be applied systematically across all banks, there are a range of activities that would follow the initial assessment described above, depending on the particular needs of the client. Specifically, the current-state risk assessment is the starting point for an AML consultant to determine the next appropriate course of action. For example, if an initial assessment in bank A reveals a training deficiency amongst key AML staff members in a particular service line, in this stance, the consultant would recommend designing and delivering advanced level training in the areas of anti-money laundering, reflecting up-to-date regulatory changes to ensure staff stay abreast of recent industry developments, tailoring the program to specific areas of weakness that were identified during the initial assessment. Similarly, another example would be a situation where bank B may require subject matter expert insight into redrafting existing AML documentation or redesigning its target operating model cutting across governance, people, technology and processes in order to more accurately reflect the bank’s risk appetite.

In summation, in the first instance, the Big 4 would provide a bank with an independent review of its AML approach, identifying the key risks, gaps, or weaknesses for improvement. The required follow-up action would inevitably be related to systems and controls, data and documentation, or incident management, where the Big 4 have experience in delivering effective solutions that enhance a bank’s AML framework and enable it to comply with regulations and remain competitive with industry peers.

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Image courtesy of Flickr

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The views expressed in this article represent those of the author and not Bright Line Law.

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