Caribbean RoundtableModerator

Wayne Shah, Senior Vice President, Wells Fargo & Company

Speakers

Alan S. Abel Director and Global AML Practice Leader, Regional Leader Regulatory Compliance, Crowe Horwath LLP 

Fi B iFiona Briscoe Senior Compliance Manager National Commercial Bank Jamaica Limited

Ryan Bahadur Senior Vice President Regulatory Compliance, Cayman National Corporation)

Presented by:Ryan Bahadur

Disclaimer

The comments and opinions expressed are those of thepresenter and should not be construed as those of thepresenter and should not be construed as those of theCayman National Group of Companies.

What Keeps Me Up

Heightened Global Scrutiny of MSB risksHigh risk business modelHigh risk business modelKeeping pace with technological advancementsMany banks closing MSB accountsLegitimate business with banking needsKnow your customers’ customerOft  l  k l d   f  li tOften less knowledge of clientMany clients have no bank accountsIncoming funds from less regulated jurisdictionsPortability of stored value cards

What Keeps Me Up

Identification of secondary card holder/recipientCayman is net outward transmitterCayman is net outward transmitterLess substantiation of source of funds“Partner” or “Sou Sou”Inability to predict future activity/account profilingSmurfingOne off transactions and shopping aroundOne off transactions and shopping aroundHigh dependence and volume in the CaribbeanCayman population is largely transientTimely updating of sanctions lists databases

Industry ControlsRetrospective Due DiligenceMSB’s are licensed and regulated in CaymanMSB agents require regulatory approvalDue Diligence on beneficial owners despite the use of intermediariesMulti‐purpose stored value cards included as MSBSubject to the CI Money Laundering RegulationsNo outsourced CDDRegulatory on‐site inspections & off‐site monitoringQuarterly regulatory returns on remittance activityQuarterly regulatory returns on remittance activityMonitoring of each MSB’s 10 largest aggregate sendersCIMA and MSB’s are required to file SAR’sCross Boarder communication and cooperation of regulators and FIU’s

Bank ControlsNo complacency because they are regulatedClient Risk Ranking – Industry, Individual (PEP, Data base scanning etc )  Geographic location base scanning etc.), Geographic location Reduced CDD in theory, Enhanced CDD in practiceInternal/external audit findingsEnhanced ongoing account monitoringOngoing dialogue between banks and MSB clientsReview MSB policies and proceduresUnderstand responsibilities and functions of agentsUnderstand responsibilities and functions of agentsUnderstand MSB practice and risk toleranceDetermine AML/CFT system capabilitiesUnderstanding technological advancementsOngoing staff training on MSB risks and bank controls

Avenues for ImprovementIncreased communication between regulator and MSB bankers on regulatory concerns and audit findingsIncreased disclosure of individual MSB remittance volumes Increased disclosure of individual MSB remittance volumes to gauge account turnover and profitability (Actual v Expected)Monitoring of common senders and recipients across different MSB companiesIncreased assurance of timely updating and scanning against sanctions listsIncreased knowledge of recipient/secondary card holderSpecialized industry training

What Keeps Caribbean AML Officers on their Toes

Fiona BriscoeFiona BriscoeSenior Compliance ManagerNational Commercial Bank Jamaica Limited

What Keeps Caribbean AML Officers on their Toes Enhanced Due Diligence

Challenges

Lottery Scams Money Lending BusinessesLottery Scams

• Utilize remittance companies and banks

• Multiple remittances/wire transfers from various senders to a few beneficiaries

Money Lending Businesses

• Unregulated

• Concerns regarding the source of the initial capital

• Less stringent KYC requirements for their

• No apparent relationship between remitters and beneficiaries

qcustomers

• Mushrooming of the number of businesses

• Co-mingling of illicit funds

What Keeps Caribbean AML Officers on their Toes Enhanced Due Diligence Challenges

Cash for Gold Traders Cash Intensive Businesses

• Unlicensed operators

• Gold shipped in contravention of existing legislation

• Funds transferred to accounts and withdrawn in cash shortly thereafter

Si ifi t tit f ld

• Jamaica is a highly cash intensive country

• Funds appear to be in excessive relative to the nature and size of the operations

• Significant amount of US • Significant quantity of gold

being exported (Jamaica not considered a gold producing country)

• Suspected links to human trafficking

S g ca t a ou t o UScurrency being lodged

• Multiple seemingly unconnected parties making deposits to accounts

What Keeps Caribbean AML Officers on their Toes Enhanced Due Diligence

Impact on the Business

• Increase in the number of suspicious transaction reports (SARs) p p ( )filed

• Increased request for additional information and documentation from law enforcement

• Longer processing time as a result of increased scrutiny of some transactions

• High volume and velocity of activities on accounts

• Freezing of accounts

• Termination of relationships

• Staff fearful of reprisal

What Keeps Caribbean AML Officers on their Toes Enhanced Due Diligence

Risk Mitigating Measures

- Reviewing accounts prior to processing transactions

- Interviewing customers

- Requesting sight of appropriate documentation (export documentation, shipment records, financial statements, tax returns)

- Engaging correspondent bankersEngaging correspondent bankers

- Verifying the physical existence of businesses

- Accessing publicly available and fee-based information in order to assess the customer’s business reputation

THANK YOU

Contact Details:

Fiona BriscoeSenior Compliance ManagerLegal, AML & Corporate Compliance DivisionNational Commercial Bank Jamaica Limited32 Trafalgar Road, Kingston 10, Jamaica

Email: briscoefn@jncb.comTel:1-876-935-2329 (office)Tel:1 876 935 2329 (office)

1-876-579-8226 (cell)

Caribbean Roundtable:Caribbean Roundtable:Regional Vulnerability Update

Florida International Bankers AssociationThursday February 22, 2012Miami

Regional Vulnerability

Overview of the Region and its partsThe forces at work

The governments and their regimesThe inter-governmental organizationsThe inter-governmental organizationsThe financial services community

Major concerns of financial institutions todayUnderstanding and applying the COSO modelHarnessing technologyAuditing and compliance testingRisk mitigation or risk transfer?Foreign pressures

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Foreign pressures.

The COSO Risk Management Model

Governments around the world asked the accountancy profession to develop global, integrated frameworks of control.

The AICPA, the International Federation of Accountants (IFAC) and more than 100 nationalAccountants (IFAC), and more than 100 national accountancy societies promulgate guidance that national accounting societies, have adapted and incorporated into their own professional authoritative and technical guidance

This model serves as the Rosetta stone for understanding AML++ risk management programs of financial institutions and glues together their efforts.

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In particular, regulators around the world have mandated that financial institutions have the capability and technology tools to effectively identify and assess their risks and to respond.

Harnessing Technology: Major Challenges

The tyranny of the mother shipDriving workflow and processes that have the controls in place that regulators wantRisk assessment technology that drives and facilitates gyresponse – macro and micro, again – with the right controlsMonitoring and calibration technology that “learns” and continuously improvesDocumenting judgment and change.

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Independent Testing

Regulators in the region hunger for confidence and quality of independent testingProfessional competenceReportspProceduresWork PapersData quality assessmentSystem validation.

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Risk Mitigation and Risk Transfer

Risk assessment is betterRisk response and controls are betterRegion wide – is risk being mitigated or is it being transferred?A j h ll th t b i t h d fi iti f i kA major challenge that begins at home – definition of risk appetite and risk tolerances.

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Foreign Pressures

The IGOsFATF, CFATF, the Commonwealth, law enforcement

The U.S., U.K. and extra territorial jurisdictionThe major global financial institutions and their regulatorsj g gHard law, soft law.

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Questions?

Caribbean RoundtableModerator:  Wayne Shah  (Wells Fargo)

Speakers: Alan Abel (Crowe Horwath)

Fi B i (N ti l C i l B kFiona Briscoe (National Commercial Bank 

Jamaica)

Ryan Bahadur (Cayman National Corporation)