ANTI-MONEY LAUNDERING / COUNTER TERRORIST FINANCING RISK

Breakfast session CDDS-AMSFinsoft

Thursday oct. 2nd 2014

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Since 2005

12 people

Application files

Compliance and execution

Governance advisory

Internal audit

(e)trainings

� 85 application files

� 100 yearly clients

Market:

320 PFS

155 banks

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4.000.000 €

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Indicators- Large scale cash

transaction- Rapid off-shore transfer after fund

deposit- Unrealistic wealth compared to clients

profile

1.000.000.000 €

WHAT DO I HAVE TO DO WITHTOM ?

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Open files: 1587

Deposit of suspicions: 1332

Proven offences: 471

87 % Banks

4 % for the others PSFs

AML/CTF : QUICK REMINDER

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- Counterfeit money ( 101 )- Forgery and use of forgeries ( 100 );- Fraud (bankruptcy, misuse of corporate assets) (81);- Drug trafficking ( 21 );- Corruption ( 16 );- Theft (15 );

- Crime and offences within the a criminal organization framework ( 14 );- Arms dealing ( 7 );- Forgery and the hacking of products ( 4 );- Abuse of market and insider trading ( 3 );

“Primary offence” “dirty” money

Legal transaction “LAUNDERED” MONEY

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International legislation:- 40 + 9 GAFI recommendations- Directive 2005 / 60 / CE of October 26th, 2005 relative to the prevention of the

financial system misuse for money laundering and of the terrorism financing purposes (“3rd anti-laundering directive”)

The Luxembourg legislation:(base law) Law of 12 November 2004 as amended on the fight against money laundering and terrorist financingThe circulars issued by the authorities (CRF, CSSF, etc.)Circular CSSF 11/529 Risk analysis regarding the fight against money laundering and terrorist financing (AML/CTF)Circular CSSF 12/552 as amended by Circular CSSF 13/563 Re: Central administration, internal governance and risk managementCSSF Regulation N°12-02 of 14 December 2012 on the fight against money laundering and terrorist financingCircular CSSF 13/556 : Entry into force of CSSF Regulation N° 12-02 of 14 December 2012 on the fight against money laundering and terrorist financing -repeal of Circulars CSSF 08/387 and CSSF 10/476

(SORRY FOR THIS)

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AML/CFT 12/02

Chap 3 : Risk Based ApproachChap 4 : VigilanceChap 5 : Internal organizationChap 6 : Cooperation with authorities

The professional has to:1. Identify and assess risks 2. Classify all customers according to

different risk levels3. Assess the risk before accepting the

customer4. Adapt his assessment according to any

significant modification5. communicate information on their risks

assessment with the CSSF

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AML/CFT 12/02

Chap 3 : Risk Based ApproachChap 4 : VigilanceChap 5 : Internal organizationChap 6 : Cooperation

Section 1: Acceptance of a new customerSection 2: Moment of identification and identity checkSection 3: identification measures of customersSection 4: identity check towards agents of the customersSection 5: identity check towards actual beneficiariesSection 6: information on the object and the nature of the business relationshipSection 7: Obligation of documents preservation and informationSection 8: Obligation of strengthened vigilance towards customersSection 9: The constant vigilanceSection 10: Execution of vigilance by third parties

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AML/CFT 12/02

Chap 3 : Risk Based ApproachChap 4 : VigilanceChap 5 : Internal organizationChap 6 : Cooperation

Section 1: Acceptance of a new customerSection 2: Moment of identification and identity checkSection 3: identification measures of customersSection 4: identity check towards agents of the customersSection 5: identity check towards actual beneficiariesSection 6: information on the object and the nature of the business relationshipSection 7: Obligation of documents preservation and informationSection 8: Obligation of strengthened vigilance towards customersSection 9: The constant vigilanceSection 10: Execution of vigilance by third parties

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AML/CFT 12/02

Chap 3 : Risk Based ApproachChap 4 : VigilanceChap 5 : Internal organizationChap 6 : Cooperation with authorities

Board of Directors

The AML/CFT policy must cover all professional obligations and notably include:

- Policy of acceptance of customers

- Procedures with regard to the identification, the supervision, the management and the mitigation of AML/CFT risks

- Acceptance and follow-up procedures of business relationships (third parties)

- Procedures to follow-up in case of suspicion

- Training program for staff awareness

- Definition of respective responsibilities

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AML/CFT 12/02

Chap 3 : Risk Based ApproachChap 4 : VigilanceChap 5 : Internal organizationChap 6 : Cooperation with authorities

ALM/CFT ResponsibleDirection levelHave to be communicated to the CSSFExperienced, master knowledge of the Luxemburg legal framework regarding AML/CFT, and be empowered within the organization

Checks the respect for the professional obligations applicableSets up the training program and raise awareness of the staffApplies the AML/CFT policyIs privileged contact of competent authorities regarding AML/CFTHandles the transmission of any information or statement with the authoritiesRegularly reports in writing, and make at least once a year a summary on its activities and its functioning

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AML/CFT 12/02

Chap 3 : Risk Based ApproachChap 4 : VigilanceChap 5 : Internal organizationChap 6 : Cooperation with authorities

AuditThe control of the AML/CFT policy is an integral part of missions of the internal audit.

The analytical report of the auditor has to contain :

- The description of the AML/CFT policy, the check of its compliance

- The appreciation of the analysis- A statement on the realization of a

regular control ;- The check of the training and

awareness measures of the employees- A statistical history of the detected

suspicious transactions

DID I LOSE YOU ?

Is guilty the one who

- commits deliberately an act of money laundering

- bring his/her help to an act of money laundering

- acquires, holds or uses the goods coming the direct or indirect product of the primary offence

• Prison sentences (1 to 5 the years) and/or fines (1.250 to 1.250.000 euros) for the (co-)authors and the accomplices. In case of recurrence the sanctions can be doubled.

• The violation of the obligations of the professional resulting from the circular is also punished even in the absence of laundering or of terrorism

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PRACTICALLY :THE SUMMARIZED CHECK LIST

1. Define / get to know the AML policy & risk management2. IdentificationIdentify > Sales / account managerRisk analysis > AML Officer What degree of vigilance? > AML Officer Customer acceptation > Management3. Ongoing follow-up of the customersUpdate of the identification and if change revise the risk analysis and degree of vigilance and to judge the pursuit of the relationship.4. If suspicion of launderingWrite an elaborate report in the AML Officer Assessment > AML Officer If validated > CRF and CSSFTake opinion and possibly stop the relationship

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SUPERVISORY SYSTEM

The professionals are required to have procedures and mechanisms of control allowing them, during the customers acceptance and the business relationships

It1) Covers all customers accounts and their transactions2) Is automatized, excepted if volume and nature don’t require such

automation.3) Supports creation of written reports4) Initial validation and regular control made by the responsible of

the AML/CFT control in order to adapt it

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(CSSF regulation n°12-02 - Chapter 5: Section 2)

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