Challenges in AML Implementation in Bangladesh
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The document discusses the challenges faced by banks in Bangladesh regarding anti-money laundering (AML) implementation, highlighting the significant impact of global de-risking and regulatory pressures. It emphasizes the need for strong senior management commitment, skilled resources, and effective compliance infrastructure. The document outlines the steps banks can take to enhance their AML programs, including diagnostic assessments, risk-based frameworks, and training solutions.
Challenges in AML Implementation in Bangladesh
- 1. AML Implementation Challenges faced by banks in Bangladesh Presented By Sarwar Chowdhury AML Annual Summit, Dhaka 2017
- 2. Page | Business • More than 70% banks globally have reported being affected by De-risking Reputation • Fines, Penalties & Sanctions affect the reputation of the Bank more than any other Business related action Growth • Affected FIs have showcased stunted long-term growth Governments & Agencies • Maintain constant pressure & vigil on the Bank Personal Liability • Heads of Bank, Compliance etc. are now going to jail What is at Stake 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 2 Insights from AMLMaps.com
- 3. Page | Scenario in Developing Countries 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 3 This is NOT JUST happening in Bangladesh • Fines show greatest increase • AML/CFT has become the highest focus for governments • Public perception is increasingly critical • Global de-risking is primarily in developing countries • Information & Compliance reporting requirements have increased in a major way • Powerful regulators are indirectly penalizing banks of other countries Insights from AMLMaps.com
- 4. Page | In the Media 7 February 2017 4 Global de-risking affecting banks Record fine highlights need for continuous AML compliance by firms of all sizes $6.5M Fine for Persistent BSA/AML Failures: Prelude to OCC's Announcement of Tougher Enforcement Environment Fintelekt AML AML Annual Summit, Bangladesh
- 5. Page | In the Media 7 February 2017 5 The IMF and the Fight Against Money Laundering and the Financing of Terrorism Regulators Renew Their Focus on Anti-Money Laundering Compliance Over 50 pc banks fail to assess money laundering risks properly Fintelekt AML AML Annual Summit, Bangladesh
- 6. Page | In the Media Western Union Settles with DOJ, FTC on Fraud and Money Laundering Violations 7 February 2017 6 Bangladesh to publish NY Fed heist probe finds after retrieving money from Philippines Bangladesh's Sonali bank fined £3.3m Fintelekt AML AML Annual Summit, Bangladesh
- 7. Page | Large dependency on correspondent banks • Such entities have highest correspondent banking relationships in the world • Global entities are fined as a result of their correspondent banking relationship • Understandably, these banks are engaging themselves in large scale de – risking Thriving curb market (Hundi) channels for money laundering • This unofficial market runs absolutely parallel to formal channels in Bangladesh • Money transfers via hundi leads to siphoning off funds from Bangladesh • The risk of Hundi market was highlighted during Demonetization in India - Remittances reduced for first time in 4 years Bank profits critically dependent on foreign remittances ($15 Billion) • Banks earn risk free commissions by routing remittances • It is estimated around 20% of the operating profits by the banks in Bangladesh are derived from forex business • Over 15 Billion Dollars remitted in 2015 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 7 Why Banking Institutions are threatened
- 8. Page | Top 5 AML Challenges In Bangladesh 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 8 1 2 3 4 5 Senior Management & Board exposure to AML requirements or Criticality Availability of the right skills & manpower Poor base level customer & transaction data Limited cost effective & Bangladesh specific solutions Need is immediate as the danger of De-risking is immediate
- 9. The Solution… A Successful AML Program
- 10. Page | Most Critical Requirement: Tone at the Top • Seriousness and Focus shown by the Board & Senior Management • Critical for success of AML Programs • Globally relevant for • Regulators & Agencies • Correspondent Relationships • Increasing personal liabilities & fines on banking professionals for AML Gaps 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 10 Chairman of Board Chief Compliance Officer Founder Chief Operating Officer Owner Former President Former Prime Minister Former Chief Executive Officer President Chief Executive Officer Global AML Actions & Designations Chairman of Board along with Founders have been one of the most convicted professionals amongst individuals. This trend is expected to continue & grow. Insights from AMLMaps.com
- 11. Page | Successful AML Implementation Resources for a Successful AML Program 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 11 People TechnologyProcess Screening Mechanism (PEP, third parties etc.) KYC diligence Transaction Monitoring Risk prioritization Independence of Function Independent testing procedures Manual processes De-centralized systems impacting monitoring & documentation Coverage & Reporting AML expertise Visibility of AML issues Management Oversight Inadequate training mechanism
- 12. Page | AML Implementation 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 12 • Lots of working parts • Combines People, Process & Technology • Based on a defined road-map • Consists of 3 phases 1. AML Diagnostic 2. Risk Map 3. Implementation Plan
- 13. Page | Building the AML Action Plan 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 13 Developing a Risk Heat Map of all the issues and concerns to prioritize an action plan. This will help in: Managing Resources Building Competency Technology Integration Risk Based Approach
- 14. Page | What do Parts of the AML Program look like? 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 14 Risk Organization Risk Based Approach Client On-Boarding Transaction Monitoring On Going Management Governance Ownership Responsibility Communication Client risk Profiling Client Screening Client Due Diligence Client Acceptance Identify & Track Suspicious Transaction Monitoring versus Expected Activity Investigation of Alerts Payment Filtering Ongoing Client Due Diligence Ongoing Screening Enhanced Due Diligence Product Due Diligence Behavior Profiling Skills & Knowledge Training Information Resource Succession Planning Management Information CAMLCO Report Compliance Reporting Suspicious Activity & Alert Management Case Management AML Program Framework BMR-Kroll Continuous Innovation Client Profiling Methods Monitoring & Detection methods Operational Risk review Methods Best Practice Methods Life Cycle Client Experience Analytics Method
- 15. Page | Risk Based Framework • Forms the base of the AML Program • Requires significant Analytics, Subject Matter and On-Ground Assessment Support • Needs to be incorporated in the AML Systems • Requires continuous assessment & evolution • Success of RBF means success of the AML Program KYC & Due Diligence • Incorporates equal parts of People, Process & Technology • Changes from Branch to HQ • Standardization & Integrity of KYC information is critical • Technology systems for Screening, Record Management & Centralization • Data Inputs for Negative Media, Sanctions & PEP Screenings 7 February 2017 15Fintelekt AML AML Annual Summit, Bangladesh 4 Important Parts | AML Program & Challenges A B
- 16. Page | Transaction Monitoring • Critical & Essential component to determine ML Gaps • Integration required with CMS and other systems • Training & team to be setup with required skills • Testing, Integration & Data reforms pre- requisite • Selection of the right tool – cost, scalability, usability & flexibility Training & Resources • Staffing the AML Department with the right people • Training Subject Matter Experts & Trainers • Using records & technology for training • Aligning the HR & Training departments to the requirements • Finding the right internal & external talent in Bangladesh • Continuous training & evaluation 7 February 2017 16Fintelekt AML AML Annual Summit, Bangladesh 4 Important Parts | AML Program & Challenges C D
- 18. Page | • A leading & trusted bank in Bangladesh, with extensive domestic, trade and remittance business • Faced extensive scrutiny by • Local Regulators • Global Agencies • Critical Correspondent Banking relationships • Required by stakeholders & relationships to establish Adequacy & Intent of AML/CFT program in the bank • At a critical juncture where there was possibility of • Extensive impact to business • Loss of reputation • Possible AML fines & fallout Introduction 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 18 What did the Bank Do?
- 19. Page | What did it do? 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 19 1 • Senior Management discussions & workshop • Steering committee for setting up strong AML program endowed with top resources • Setup of an independent AML function 2 • Kroll-BMR conducted AML Diagnostic to assess the AML standing of the bank • Risk Map of Med to High risk areas determined • Listed AML/CFT gaps for the banks with follow-up plan 3 • Kroll-BMR created a comprehensive AML roll-out plan • All aspects & departments covered • Technology & training support brought into the bank • Monthly tracking of milestones to ensure completion • Senior banking officials made project owners to ensure implementation AML Diagnostic Commitment by top management AML Program Enhancement
- 20. Page | Step 1 | Commitment by top management 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 20 1Commitment by top management The Board and Senior Management quickly swung into action to determine requirements of various external stakeholders Constituted a high level steering committee to determine next steps Started engaging with regulators, agencies & relationships to communicate plans Engaged with a leading global AML advisory team of Kroll-BMR Setup an independent AML function headed by a senior experienced banking professional to ensure focus Setup a focused & high energy AML Project Management team
- 21. Page | Step 2 | AML DiagnosticTM Extensive High Level Review of the Bank’s AML Program A. KYC & Due Diligence B. Transaction Monitoring C. Screening D. STR/ SAR filing E. Risk Based Framework F. Management Oversight G. Training and Resources H. Independent Testing I. Global Relationships J. Record Keeping K. Branch Monitoring L. Reputation Management Screening Mechanism KYC diligence Transaction Monitoring Risk prioritization Independence of Function Independent testing procedures Manual processes De-centralized systems impacting monitoring & documentation Coverage & Reporting AML expertise Visibility of AML issues Management Oversight Training mechanism People Process Technology 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 21 2AML Diagnostic
- 22. Page | Step 3 | AML Program Enhancement Post Assessment, a year long exercise was carried out to enhance the following major areas of concern A. Risk Based Framework B. KYC & Due Diligence C. Screening D. Transaction Monitoring E. Analytics G. Compliance Organization H. Training I. Record Keeping Procedures J. Independent Testing K. KYC Remediation Roll-Out Technology & Process Incorporate Handholding End State Testing & Execution 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 22 3AML Program Enhancement
- 23. Page | Creation of a future-ready AML Program, based on the business realities & global best practices Development, Testing, Implementation and Handholding through the AML Program creation process 4 On ground implementation of various process, documentation, policy, analytics and procedures for the AML Program Linkage of varied parts of the AML Program, for seamless integration with the Risk Based Framework Quality assessment and testing of the outcomes, process and program under development 1 2 3 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 23 Key Results
- 24. In Summary…
- 25. Page | 5 Things to do NOW! 7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 25 Step1 Workshop for Board Step2 Empowered Senior Management Committee Step3AML Diagnostic Step4 Bring in the Technology Step5 Create the AML roadmap
- 26. Thank You! Happy to take your Questions AML Annual Summit, Dhaka 2017