We woke reasonably late following the feast and free flowing wine the night before. After gathering ourselves and our packs, we headed down to our homestay family’s small dining room for breakfast.
Refreshingly, what was expected of her was the same thing that was expected of Lara Stone: to take a beautiful picture.
We were making our way to the Rila Mountains, where we were visiting the Rila Monastery where we enjoyed scrambled eggs, toast, mekitsi, local jam and peppermint tea.
Yet strangely the place did not seem crowded. I’m not sure if it was the sheer size of the place, or whether the masses congregated in one area and didn’t venture far from the main church, but I didn’t feel overwhelmed by tourists in the monastery.
Headed over Lions Bridge and made our way to the Sofia Synagogue, then sheltered in the Central Market Hall until the recurrent (but short-lived) mid-afternoon rain passed.
Feeling refreshed after an espresso, we walked a short distance to the small but welcoming Banya Bashi Mosque, then descended into the ancient Serdica complex.
We were exhausted after a long day of travel, so we headed back to the hotel and crashed.
I had low expectations about Sofia as a city, but after the walking tour I absolutely loved the place. This was an easy city to navigate, and it was a beautiful city – despite its ugly, staunch and stolid communist-built surrounds. Sofia has a very average facade as you enter the city, but once you lose yourself in the old town area, everything changes.
Clothes can transform your mood and confidence. Fashion moves so quickly that, unless you have a strong point of view, you can lose integrity. I like to be real. I don’t like things to be staged or fussy. I think I’d go mad if I didn’t have a place to escape to. You have to stay true to your heritage, that’s what your brand is about.
We woke reasonably late following the feast and free flowing wine the night before. After gathering ourselves and our packs, we headed down to our homestay family’s small dining room for breakfast.
Refreshingly, what was expected of her was the same thing that was expected of Lara Stone: to take a beautiful picture.
We were making our way to the Rila Mountains, where we were visiting the Rila Monastery where we enjoyed scrambled eggs, toast, mekitsi, local jam and peppermint tea.
Yet strangely the place did not seem crowded. I’m not sure if it was the sheer size of the place, or whether the masses congregated in one area and didn’t venture far from the main church, but I didn’t feel overwhelmed by tourists in the monastery.
Headed over Lions Bridge and made our way to the Sofia Synagogue, then sheltered in the Central Market Hall until the recurrent (but short-lived) mid-afternoon rain passed.
Feeling refreshed after an espresso, we walked a short distance to the small but welcoming Banya Bashi Mosque, then descended into the ancient Serdica complex.
We were exhausted after a long day of travel, so we headed back to the hotel and crashed.
I had low expectations about Sofia as a city, but after the walking tour I absolutely loved the place. This was an easy city to navigate, and it was a beautiful city – despite its ugly, staunch and stolid communist-built surrounds. Sofia has a very average facade as you enter the city, but once you lose yourself in the old town area, everything changes.
Clothes can transform your mood and confidence. Fashion moves so quickly that, unless you have a strong point of view, you can lose integrity. I like to be real. I don’t like things to be staged or fussy. I think I’d go mad if I didn’t have a place to escape to. You have to stay true to your heritage, that’s what your brand is about.
We woke reasonably late following the feast and free flowing wine the night before. After gathering ourselves and our packs, we headed down to our homestay family’s small dining room for breakfast.
Refreshingly, what was expected of her was the same thing that was expected of Lara Stone: to take a beautiful picture.
We were making our way to the Rila Mountains, where we were visiting the Rila Monastery where we enjoyed scrambled eggs, toast, mekitsi, local jam and peppermint tea.
Yet strangely the place did not seem crowded. I’m not sure if it was the sheer size of the place, or whether the masses congregated in one area and didn’t venture far from the main church, but I didn’t feel overwhelmed by tourists in the monastery.
Headed over Lions Bridge and made our way to the Sofia Synagogue, then sheltered in the Central Market Hall until the recurrent (but short-lived) mid-afternoon rain passed.
Feeling refreshed after an espresso, we walked a short distance to the small but welcoming Banya Bashi Mosque, then descended into the ancient Serdica complex.
We were exhausted after a long day of travel, so we headed back to the hotel and crashed.
I had low expectations about Sofia as a city, but after the walking tour I absolutely loved the place. This was an easy city to navigate, and it was a beautiful city – despite its ugly, staunch and stolid communist-built surrounds. Sofia has a very average facade as you enter the city, but once you lose yourself in the old town area, everything changes.
Clothes can transform your mood and confidence. Fashion moves so quickly that, unless you have a strong point of view, you can lose integrity. I like to be real. I don’t like things to be staged or fussy. I think I’d go mad if I didn’t have a place to escape to. You have to stay true to your heritage, that’s what your brand is about.
I will never forget Summer of 2021, where I had regulatory audit of AML/CFT. We never had thought that Scenarios which will help us in transaction monitoring can become a trap. We proudly spoke with twinkle in our eyes in our preliminary meeting with regulators that, we have most robust AML/CFT system. Later they shown us what our transaction monitoring has missed. I felt a chill run down my spine at the thought of consequence. It was bad, really bad. I had to provide written explanation to my organization that it won’t repeat again and I would make full commitment to improve transaction monitoring. After that incident, I realized for effective transaction monitoring, we don’t need a lot of scenarios, what you need to understand is what story your transaction data is telling you? So, are you willing to hear that story.
In the ever-evolving landscape of financial crime prevention, staying ahead of illicit activities like money laundering is paramount. As regulatory requirements tighten and criminals become increasingly sophisticated, financial institutions are turning to advanced technologies to bolster their defenses. One such technology making waves in the realm of anti-money laundering (AML) is data visualization tools like Power BI. In this article, we delve into the pivotal role Power BI plays in transaction monitoring for AML, empowering institutions to identify and combat suspicious transaction patterns effectively.
Understanding the Challenge:
Money laundering poses a significant threat to the integrity of the financial system, allowing criminals to conceal the origins of illicit funds. Traditional methods of detecting suspicious transactions often rely on manual processes and rudimentary tools, making it challenging to uncover intricate patterns indicative of money laundering activities. Moreover, the sheer volume of transactions processed daily further complicates the task, increasing the likelihood of oversight and false positives.
The Power of Data Visualization:
Enter Power BI, a powerful data visualization tool that empowers financial institutions to gain actionable insights from vast amounts of transactional data. By leveraging intuitive dashboards and interactive reports, Power BI enables analysts to identify anomalies, trends, and patterns that may signify suspicious behavior. Through dynamic visualizations such as charts, graphs, and heatmaps, complex data sets are transformed into digestible insights, facilitating informed decision-making in real-time.
Case Studies and Success Stories:
Several financial institutions have already embraced Power BI as a cornerstone of their AML compliance efforts, witnessing tangible benefits in terms of efficiency and effectiveness. For example, a leading bank deployed Power BI to analyze transactional data across its global operations, resulting in a 30% reduction in false positives and a 50% increase in the detection of suspicious activity. Similarly, a fintech startup leveraged Power BI to monitor peer-to-peer transactions, enabling proactive identification of money laundering schemes and enhancing regulatory compliance.
Let’s demonstrate with the following example:
Meet Rahul. He owns a clothing store, Mahima Impex and dreams big. Recently, he got a machine that helps customers pay with their credit cards. It’s called a POS machine, and it’s like a cash register. One day, a man named Mr. Tulsi Ram comes to Rahul’s shop. He seems friendly and buys a lot of clothes. While chatting, Rahul mentions his dream of expanding his store but says he needs money for it. Mr. Tulsi Ram then tells Rahul something shocking – he admits he smuggles gold illegally. He says he wants to clean his dirty money, and he has a plan. He suggests using Rahul’s POS machine to swipe credit cards and take out cash. In return, Mr. Smith promises to give Rahul 20% of the cash. Rahul gets excited about the offer because it sounds like easy money. He agrees without thinking much.
Now, let’s us imagine, we don’t know such transaction is happening within our organization how we are going to identify it using Power BI?
Credit Card Transaction Visualization
Now let’s break down this visualization to identify suspicious transaction mentioned in above story:
1. In this figure, Credit Card transaction of the customer Tulsi Ram has increased from month of August and same amount of credit card transaction has been observed for the month of September and October.
2. In this figure, Credit Card Transaction is matched with Credit Card limit assigned to the customer. There is only single line meaning customer has used up all his credit card limit meaning for every month his credit card transaction is equal to credit card limit. The credit card limit of the customer is given in figure 3.
5. This figure shows biggest red flag, here the map shows the location from where customer has performed his credit card transaction. Here, it is single point meaning that customer has performed credit transaction from a single place that MAHIMA Impex(fig 4) as mentioned in our earlier.
By looking at this visualization, one can see that customer is doing some fishy transaction as why he is performing all credit card transaction from single place and also he has used up all his credit card limit.
There is another benefit from this visualization, now, you can create scenario like: “Generate Alerts for those customers, who utilizes more than 80% credit card limit by doing credit card transaction from single location”.
If you create such scenarios, you can be rest assured, that almost 90% of your alerts lead to Suspicious Transaction Reports.
Radhika is a homemaker who isn’t well-versed in banking matters. Her husband, Ramesh, instructed her to open a bank account. He requested all the checkbooks, mobile banking, and internet banking credentials from her. Unknown to Radhika, Ramesh’s real intention behind having her open the account was to channel his business transactions through it, utilizing her account for the purpose of tax evasion.
Now, how can you identify red flags in this situation using data visualization tools like Power BI.
Overall Customer Transaction
In this figure, customer total debit and credit transaction way more than the annual income of that customer.
The cash transaction both deposit and withdrawal is around 800k to 1 million.
The online transaction is about 20 million.
Now based on our story, customer is housewife. Housewife usually don’t have fixed source of income, they depend upon her husband or other family relative to provide them with income source. So how come, there is so much transaction in her account. This definitely means that there is presence of hidden beneficial owner, that is her husband, who is routing his business transaction through her account so that his business income is under reported and his tax liability will be less, thereby, leading to tax evasion. So we can safely file this account as suspicious transaction report against this account, if her husband is unwilling to provide his Know Your Customer Information.
Finally, after identifying such suspicious pattern, we can create a scenarios to monitor housewife account to see if there are other cases or not. One such scenario could be, if there are transaction above 50lakhs in housewife account we can treat that account as suspicious.
Key Features and Benefits:
Advanced Analytics: Power BI’s advanced analytical capabilities, including machine learning algorithms and predictive modeling, enable institutions to uncover hidden patterns and predict future trends in transactional data. By analyzing historical transactional behavior, Power BI can identify deviations from normal activity, flagging potentially fraudulent transactions for further investigation.
Real-Time Monitoring: In the fight against money laundering, timeliness is critical. Power BI facilitates real-time monitoring of transactions, allowing institutions to detect and respond to suspicious activity promptly. Automated alerts and notifications can be configured to trigger when predefined thresholds are met, ensuring swift action to mitigate risks.
Customizable Dashboards: Power BI offers unparalleled flexibility in dashboard customization, allowing institutions to tailor visualizations to their specific AML requirements. From transaction volumes and geographic trends to customer behavior analysis, Power BI empowers analysts to create personalized dashboards that provide comprehensive insights into suspicious activity.
Seamless Integration: Integration with existing data sources and systems is seamless with Power BI, streamlining the data aggregation process and ensuring a unified view of transactional data. Whether data resides in legacy systems, databases, or cloud platforms, Power BI can consolidate disparate sources into a centralized repository for analysis.
In the battle against money laundering, data visualization tools like Power BI are invaluable allies, empowering financial institutions to stay one step ahead of criminals. By harnessing the power of advanced analytics, real-time monitoring, and customizable dashboards, Power BI enables analysts to uncover suspicious transaction patterns and mitigate risks effectively. As regulatory scrutiny intensifies and criminals devise ever more sophisticated schemes, the role of Power BI in AML transaction monitoring will only become more pivotal, safeguarding the integrity of the financial system for years to come.
Have you wondered is their any powerful AI tools that will reduce my time and effort in Transaction Monitoring?
Enter, Network Analytics
Money laundering poses a significant threat to the global financial system, enabling criminals to disguise the illicit origins of their funds. In response, financial institutions and regulatory bodies employ sophisticated technologies to detect and prevent these illegal activities. Among these technologies, Network X, a Python library for the creation, manipulation, and study of complex networks, has emerged as a powerful tool for analyzing financial transactions and identifying suspicious patterns. This article explores the application of Network X in Anti-Money Laundering (AML) transaction monitoring, focusing on its role in uncovering suspicious transactions.
Understanding Anti-Money Laundering Transaction Monitoring Anti-Money Laundering transaction monitoring involves the systematic review of financial transactions to identify and investigate suspicious activities. Traditional approaches rely on rule-based systems that flag transactions based on predefined criteria such as transaction amount, frequency, and counter parties. While effective to some extent, these rule-based systems often struggle to adapt to evolving money laundering techniques and may generate a high number of false positives.
In the ever-evolving landscape of financial transactions, the battle against money laundering has become more complex than ever. As financial crimes continue to adapt and become sophisticated, it’s crucial for organizations to leverage cutting-edge tools and technologies to stay one step ahead. In this regard, the integration of Network Analytics, particularly through the use of Network X, has emerged as a game-changer in enhancing the effectiveness and efficiency of transaction monitoring procedures.
Network Analysis in AML Transaction Monitoring Network analysis offers a complementary approach to traditional rule-based systems by examining the relationships and interactions between entities involved in financial transactions. NetworkX provides a robust framework for constructing and analyzing transaction networks, where nodes represent entities (e.g., individuals, businesses, accounts) and edges represent financial transactions between them.
One common application of NetworkX in AML transaction monitoring is the creation of transaction graphs, where nodes represent accounts or entities, and edges represent financial transactions between them. By analyzing the structure and characteristics of these graphs, analysts can identify suspicious patterns indicative of money laundering activities. For example, the presence of densely connected clusters of accounts engaging in frequent, high-value transactions may suggest the existence of a money laundering network.
Detecting Suspicious Patterns with NetworkX
NetworkX offers a variety of algorithms and metrics that can be leveraged to identify suspicious patterns in transaction networks. Some of the key techniques include:
Centrality Measures: Centrality measures such as betweenness centrality and eigenvector centrality can help identify nodes that play a crucial role in facilitating transactions within the network. Nodes with unusually high centrality scores may warrant further investigation as potential money laundering hubs.
Community Detection: Community detection algorithms such as Louvain modularity optimization and Girvan-Newman can partition the transaction network into cohesive groups or communities based on the strength of connections between nodes. Anomalous communities with a disproportionate number of high-risk accounts or unusual transaction patterns may indicate money laundering activity.
Network Motif Analysis: Network motifs are recurring subgraphs or patterns that occur frequently within a larger network. By identifying and analyzing common motifs in transaction networks, analysts can uncover typical transaction patterns associated with legitimate activities and detect deviations that may signal suspicious behavior.
Anomaly Detection: NetworkX supports various anomaly detection techniques that can flag transactions or nodes exhibiting unusual behavior compared to the overall network dynamics. These anomalies may include sudden changes in transaction volume, unexpected connections between unrelated entities, or deviations from typical transaction patterns.
Why Network Analytics?
Uncovering Hidden Patterns: Network Analytics excels in revealing hidden patterns and relationships within large datasets. In the context of AML, this capability is invaluable for identifying complex money laundering schemes that may otherwise go unnoticed using traditional methods.
Behavior Analysis: By modeling financial transactions as a network, Network Analytics enables a comprehensive analysis of transactional behavior. This approach allows AML professionals to identify outliers and anomalies that may indicate potential illicit activities.
Enhanced Risk Assessment: Network Analytics provides a holistic view of the connections between entities, allowing for a more accurate risk assessment. This can significantly improve decision-making processes and resource allocation in AML efforts.
Real-time Monitoring: NetworkX facilitates the development of real-time monitoring systems, enabling organizations to detect and respond to suspicious activities promptly. This proactive approach is crucial in staying ahead of constantly evolving money laundering tactics.
Getting Started with NetworkX for AML:
I have create this tutorial to help you undertand potentiality of Network Analytics,
Let’s imagine that you have few accounts in your organization , which have made few accounts transfers between them.
Accounts with no of account Transfers
If you look through the table above, you see that some accounts have made repeated account transfers with other accounts.
Well, it might be difficult for you to see which account doing transfers repeatedly, from the table. Why not visualize this.
Network Graph
Now this is more clear, in the above figure, you can see the accounts making account transfer and the account which are making high account transfer to other accounts, the line between them darker.
From the above figure it is clearly seen that A/c:1234567890123450 making most account transfers to others.
Let’s explore this a bit further.
Now we want to find important accounts meaning those accounts involved in high account transfer activity. Degree_Centrality of Networkx will help us to determine it.
Determining the importance of Account(
So, our intution is confirmed, most important account is A/c:1234567890123450.
Now the next important thing is to find the linking accounts that those account which is acting as funnel for moving money from orgin to destination. We will use the help of Betweenness_Centrality of NetworkX.
Determining the linking accounts
It looks like A/C:1234567890123450,8901234567890120,4567890123456780 are acting as funnel account. If you look at the picture above figure, you can easily confirm this. For e.g. A/c: 8901234567890120, linking A/C:1234567890123450 and A/C:2143568970325870.
Ok, one most important part is missing here. How do we determine, which accounts to investigate for suspicious transactions?
For this we need to add more features for our account, let’s add that
Adding occupation and risk rating
Now, we have accounts with occupation and risk grading of account operation.
Now we will do most powerful analysis to determine the group(Cluster) of the customers that need to be investigated for suspicious transaction.
Cluster Analysis
If you are finding difficult to undertand the, here are clusters of the customers:
Clusters of the customer
The above clusters is created on the basis of 3 feature of account that is number of account transfer, risk grading and occupation.
The most relevant customers group for our investigation purpose is 0,1,4. Can you see from the figure how they are closely related because they were doing more account transfers with each other.
So there me some kind of nexus between these customer. Also, from the table , most high risk customer like PEP, jwellers is here.
In this way network analytics can help to pinpoint thos account which needs to be investigated for STR purpose
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https://learnwithsiorik.com/chatbot/
Conclusion:
In the fight against money laundering, staying ahead requires adopting innovative approaches, and Network Analytics, powered by NetworkX, offers a promising avenue. By understanding and harnessing the capabilities of these tools, organizations can revolutionize their transaction monitoring procedures, leading to more effective and efficient AML efforts. Embrace the power of Network Analytics – the key to unraveling the complexities of financial networks and safeguarding the integrity of our financial systems. #NetworkAnalytics #AML #DataScience #FinancialCrimePrevention
In 2023, 11 Banks in UAE were fined USD 12.5 million for poor money laundering and terrorism funding controls. Deutsche Bank AG fined $1.9 million for poor AML internal controls. Standard Chartered Trust USD 194 thousand penalties related to onboarding, client due diligence, risk evaluation practices, and systems. Bank of China UK fined 2.3 million for facilitating terrorist financing. Payoneer levied a fine of $1.4 million for sanction violations.
What was one thing that you found common in all these cases?
Right, all of the institutions were found because either they did not have proper AML/CFT program or even if they have, it was not effectively implemented.
The Financial Action Task Force’s (FATF) AML/CTF methodology recommendations state that “Financial institutions should be required to maintain an adequately resourced and independent audit function to test compliance (including sample testing) with procedures.
In general, AML/CFT Audit is a dynamic, risk-based, independent oversight process that allows institutions to understand the effectiveness of AML/CFT controls. This includes determining whether the organization is compliant with applicable financial crime laws, regulations, and internal policies and procedures.
In summary, AML/CFT auditor performs the following activities
Perform testing to assess the design and effectiveness of controls aimed at mitigating AML/CFT Risk
Identifying and escalating control weaknesses to senior business and compliance management
Coordinating with compliance and business groups to develop corrective action plans where control gaps are identified
Ensuring that corrective actions have been implemented sustainably
Why is AML/CFT Audit different from other types of the audit?
Most audit professionals are a historian who provides an opinion on the truth and fairness of a set of financial statements covering a period in the past.
The auditing and independent testing of Money Laundering/Terrorist Financing (ML/TF) are very different. There is a requirement to look at every business process with customer transactions. Whereas the financial statements are required to be materially correct, in the ML/TF world there is almost zero tolerance for error. In AML/CFT audits, the auditor should put greater emphasis on the design of effective controls to prevent and detect potential ML/TF events in the future.
We are not against Certified Public Accountants and Chartered Accountants, but we are suggesting, the audit team should have the right subject-matter expertise. If an audit is performed by anybody, it can put the company at risk that is, when examiners come in to look at work effectiveness, they find flaws in the report, therefore, perceive the whole organization to be weak on AML. An organization needs to Hire subject-matter experts, not just accountants or career auditors. Make sure the audit team includes people who have “been there and done that” from within business lines and compliance teams.
The auditor is the last line of defense in the context of Risk management three lines of defense. Ultimately, if internal audit fails as the last line of defense, meaning unable to detect loopholes in AML/CFT program, the financial institution can be exposed to enforcement actions as well as their executives might be as well.
Having Internal audit or Compliance Testing Function is enough?
Independent review is one of the pillars of having a strong AML/CFT Program.
Principle 7 of the Basel Committee of Banking Supervision also considers monitoring and testing as one of the key compliance function responsibilities. The principle says that the “Compliance function should monitor and test compliance by performing sufficient and representative compliance testing.”
Therefore, Compliance Testing can be defined as a periodic, independent, and objective assessment of AML/CFT-related processes and controls. Compliance testing aims to assess whether the elements, processes, and controls of the AML/CFT program are designed appropriately and are operating as designed.”
A few of the key issues to consider to ensure the effectiveness of a compliance-testing program is listed below:
The commitment of Top Management
The corporate culture of integrity
Clearly defined purpose and responsibilities
Technological Sound
Apply a robust and consistent methodology
Ensure buy-in from the business
Work effectively with other control functions
Maintain flexibility in the monitoring plan
Sadly, this is not always the case.
Few problems with the Internal audit and Compliance Testing Function
Despite the entire regulatory framework, compliance monitoring and testing adopted in many banks is still a “tick-box” or checklist approach. It is performed periodically without consideration of the overall risks. This myopic approach by many banks fails to adequately assess the control framework and hence runs the big risk of regulatory censure or hefty fines.
In several instances, compliance monitoring and testing are embedded in business as usual with no or very limited powers to influence the business actions. This ultimately leads to a situation where compliance testing reports are not taken very seriously.
Often the senior management behaves in an intimidating way toward the compliance testing staff. There are also cases of compliance officers in some of the biggest banks experiencing intimidation by business management to suppress the results of their compliance testing or other compliance-identified issues.
What should you expect from AML/CFT Audit?
In sections to follow, we will discuss, what a good AML Audit looks like. This will also help you in drafting Request for Proposal(RFP) for AML/CFT Audit.
1. Understanding Business Needs
Good AML Auditors will understand specific features of Institution situations For example, does the institution have a very high cash-intensive customer base? Does it send and receive large volumes of international funds transfers? Are there any imminent changes impacting AML risks, such as branching into a new market, new products, or service lines? What types of AML problem areas have been identified in previous examinations?
2. Considering the Needs of Stakeholders
Good AML auditors have very good communication skills, they know that clients and other stakeholders need their help. They try to understand their needs and devise audit scope and objectives accordingly. They don’t have a police attitude and they want to try to add value to the organization by identifying AML’s weaknesses.
3. Reviewing AML/CFT Governance
Good AML Auditors look at AML Governance. It is not surprising that without a strong culture of compliance coming from the board and senior management, there is a likelihood of failure of internal controls no matter how the Second line of defense tries to mitigate risk. Throwing all the money in the world into control without culture is a waste.
4. Verifying AML/CFT Risk Assessment
Good AML Auditors will review the Risk Assessment of your organization if not they will perform risk assessment by themselves and identify risky areas like organization risk assessment and management strategies, alignment of policies and procedures with the applicable regulatory framework, customer onboarding, and due diligence procedures and transaction monitoring systems and procedures. Hence, a risk-based approach should be adopted to determine the areas that should be incorporated into the scope and design of these independent AML audits.
5. The Clarity in Scope and Methodologies
Good AML Auditors will have clarity in audit scope and what methodologies to be applied during the audit, like assessing the policies and procedures to confirm that the design of controls is appropriate and aligned with regulatory requirements as well as industry best practices, bank’s pre-existing compliance risk assessment, and other self-assessments, testing the effectiveness of controls through a sampling approach like reviewing your opening and closing procedures, reviewing process of filing Suspicious Activity Reports, AML Traning Program. The resulting risk profile for each of these areas/units will drive the extent of testing coverage and determine the Audit plan
6. Good AML/CFT Audit Plan
Good AML Auditors will have an Audit plan as a road map of potential testing areas or units that are each assessed and risk-rated via a combination of quantitative and qualitative9 inputs. The universe should cover all relevant financial crime risks (e.g., customers, products/services, transactions, markets/geographies) and other areas (e.g., mitigating controls, business functions, organizational entities) that may warrant potential testing coverage. The proper audit plan which will include
The review topic/area: business area, relevant risk/control categories
The timing of the review: when to start audit relevant quarter/year
The type of review: limited scope, the full scope
The objective of the review: what the results of the testing are intended to show
Different factors will be considered by AML auditors while developing an audit plan include:11
Existing or prior testing coverage, including internal and external examinations
Areas where there is a regulatory expectation or mandate to review the area
Changes/additions since the last testing review (e.g., in regulations, business practices, products/services, risk, controls)
Relevant issues or risks that are trending in the industry
Information collected and/or learned through ongoing compliance monitoring
7. Subject Matter Experts
Good AML Auditors will provide resumes, bios, or credentials of the individual(s) who will be on-site performing the work. It recommended that they possessed certification like CAMS-AUDIT or some kind of certification relation Anti-Money Laundering. Auditors need to be proficient with the respective legal and regulatory framework; however, a successful auditor will also possess industry-specific experience and a high level of commitment to the process.
They will be knowledgeable and remain updated about new topics, trends, and requirements of Anti-Money Laundering.
The auditor will understand what type of technologies you are using in achieving AML/CFT objectives. After a brief introduction, they will able to measure its effectiveness. Since they are familiar will similar kinds of technologies, as they have audited in other organizations, they can suggest features that you are missing.
Auditors will have embraced new technology like data analytics, machine learning, and other tools so that they can more quickly identify the root cause of compliance shortfalls and promptly deploy resources to correct issues that present the greatest risk. Automating testing processes can help financial institutions enhance their overall risk assessment and testing processes, while also freeing up skilled personnel to focus on areas of higher complexity or risk.
Would like to conduct AML/CFT audit or compliance testing by yourself? How about checking out following online course.
Good AML Auditors will provide a reasonable time frame to complete the audit depending upon their scope. They will provide a reasonable cost of audit based on the scope of the assignment, by explaining their logistical elements as well as manpower requirement, these should be clear from the outset of each audit.
9. AML Auditors are your Friends
The auditor will not only raise issues but provide a practicable and effective solution. They will recommend what course of action should be taken to protect the organization from any kind of AML/CFT risk. During the review, the auditor must critically challenge the entire AML program and the related products and services covered by AML requirements.
One of the more critical components of the independent review process is reporting all observations to the compliance officer so the officer can develop a remediation plan. The compliance officer should communicate the noted observations to senior management and track the remediation progress. Regular, independent reviews are essential for identifying deficiencies and continually strengthening an AML program.
The auditor may provide you with a sample report so that you can know the level of detail of findings and recommendations these reports include.
[pullquote]If you are facing any kind of AML/CFT issues in your organization, let us know by filling this form. We may able to guide you.[/pullquote]
If you consider all the above points discussed above, you will be able to select the best AML/CFT auditor for your organization. Good Audit not only helps to improve your AML/CFT program but also prevents your organization to suffer from any regulatory fines and penalties which in turn reduces chances of reputation risk, operation risk, and financial risk.
Finally,
Make the right choice call us for free consultancy
We are risk simplifiers, our expertise includes AMl/CFT Risk assessment, AML/CFT Audit, and any other matters related to AML/CFT to help you manage AML/CFT risk in your organization easily.
We will help you in performing AML/CFT audits and improve existing Internal audits or existing compliance testing.
I believe most of you who have landed this post may be preparing for CAMS-Audit or searching for more information about CAMS-Audit. In that case, you will find this article useful.
I have completed CAMS-Audit in January 2022 and I would like to share my experience. I think this might be valuable in your pursuit of this certification.
Background
Previously the CAMS-Audit certification involved a 3-day in-person workshop and a white paper to achieve the certification. After Covid-19, ACAMS has changed the format for this certification. Now you can take the exam to pass this certification.The exam consists of 90 multiple choice questions covering all 3 parts of the study guide. The allowed time for the exam was 175 minutes. More about this later on.
Also regarding cost, my suggestion is that you contact provided ACAMS representative. You can even ask for a discount and they are willing to help in any way possible. So my suggestion is don’t directly pay for the certification package by going through website, sending mail to ACAMS about your interest in certification, and talk to one of their representative. Trust me, you will get a good deal.
So, if you are one of those, who may thinking, is this course suitable for me or not. I have written a separate article here. This article will explain why any organization needs to perform AML/CFT about. You will also have a general idea of what the CAMS –Audit is all about and whether you should pursue this course or not.
Study Materials
I have to be honest here. The 280 page long CAMS-Audit Study Guide is poorly designed. The material is re-written, there are grammatical mistakes. Don’t get me started about formatting. It looks more like a manuscript rather than a properly designed book. My main complain with this is that the study material does not follow the proper order. I found losing my chain of though frequent times. In any case, you can divide the study guide into three parts:
Chapter 1: Audit Program
AML Audit Process overview
Phases of AML audit
AML Governance
Audit considerations
Risks –based audit plan
Chapter 2: Auditing the AML Risk Assessment and other elements of the AML Program Auditing the AML Risk Assessment / Enterprise-Wise Risk Assessment (EWRA)
Auditing KYC / CDD
Auditing transaction monitoring and transaction screening
Chapter 3: Auditing SARs/STRs, training, and communication of the audit results
Auditing the SAR and STR process
Issue management, validation, corrective action
Training
Presenting the results of an AML Audit
Again, it is up to you to make sense of all of these and derive an order. In essence, you have to know what Audit is all about and how to apply its concepts while performing AML Audit. What helped me to pass this exam was my audit experience. I have been a financial auditor, IT auditor, internal auditor, external auditor. Audit concepts are same in all sector, if you know these concepts, it will be really help you pass this exam.
Again, I don’t mean to discourage you, if you are not from an audit background. But you really need to put more effort here. After all, this is advanced certification and a major upgrade from CAMS. So you have to be well prepared. But the good news is you will be tested from the concepts in the study guide. I also suggest you go through ACAMS white paper. Try to read as many white paper on AML Audit, you can. This will help you immensely.
Preparation
Give yourself ample of time to prepare for this exam. This one is not to be taken lightly. I invested 2 hours daily for over the period of 3 months to prepare for this exam. Some of you may take less time. Besides, make sure you go through study guide at least thrice, to grab all the concept and inter-link them. If you are not from audit background, you may want to hone on some basic concepts of audit. There are literally thousands of websites dedicated to this. Further, you may want to go through this article which will warm up you to AML/CFT audit. ACAMS also provides virtual training for CAMS-Audit, but they are quite expensive. However, if you have enough budget, you can try that.
Exam
I use to tell people this joke, “People usually don’t fear exam than its result.”. As per Sun Tzu, if you know you strength and of your enemy, you don’t need to fear the result of 1000 battles meaning when you are fully prepare, you don’t have to fear the result itself. But I think Sun Tzu will be wrong in case of this exam. As I said earlier you will be tested from the concepts of Study guide, no doubt but you need to know when, how, why, where to apply those concepts. This one is tricky. So you need to understand the scenario very carefully and decide which options to choose. Again there is no clear distinction between right and wrong , most will depend upon you intuition and understanding of study guide.
Again, my previous audit background helped me lot here. As a auditor, your main job is to identify what controls in regard to Policies, procedures and regulation are implemented or not implemented in the organization. How is this affecting AML/CFT risk and what recommendation do you need to provide ? There is saying for Auditors that they are watchdog but not hound-dog. You will identify the issues but will not involve directly to solve them. I hope this piece of advice will help you because, this exam will through you a curve ball.
Also be mindful of time. There will be long scenarios question , so you think that this one is quite difficult and you need some time then mark that question for review and come back after. In this way you will save a lot of time.
Mock Test
When you register for this exam, we will have a learning portal where you will find some mock tests. Don’t get hang of it, they will ask exact words and letter from study guide. But this is not true in real exam. Majority of question will be scenario based. So, if you are getting failing marks in mock test, don’t sweat.
Considering toughness of this exam, it lead me to creation of this course in Udemy, which will guide you properly in your preparation for this exam. In this couse, I will guide you in the planning, implementation, completion of the AML/CFT Audit in a fictional company, Rayne Development Bank. Here, I have use animation and power of storytelling to make your learning journey fun.
Between the years 2010 and 2013, there have been over twenty‐five AML‐related consent orders, written agreements and cease and desist orders and more than $900 million in fines. According to a report issued by the U.S. Senate, recent prosecutions and legal actions relating to OFAC violations between 2010 and 2012 have amounted to over $1.4 billion, involving well‐known financial institutions3. Based on metrics from the U.S. Department of the Treasury, OFAC‐related penalties and settlements between January 2, 2013 and October 25, 2013 totaled $12,875,278.(Source: http://www.bankersonline.com/security/bsapenaltylist.html)
Based on a review of regulatory orders in 2012 and 2013, frequently cited AML program weaknesses included:
· Inadequate customer due diligence and enhanced due diligence practices.
· Incomplete identification of high‐risk customers.
· Insufficient policies, procedures and training.
· Failures in monitoring and identifying suspicious activity.
· Poor reporting and filing practices relating to suspicious activity.
· Ineffective independent testing and audit functions.
Many regulators expect that organizations to be more proactive than reactive by improving their risk management practices and auditing their AML compliance program to ensure effective AML compliance program.
The main objective of this article is to make the organization aware that they need to perform AML/CFT audit like audits like Financial Audit, External audits. Further, this article will also guide the candidate who is pursuing AML/CFT Audit. That is the reason why many jurisdictions have mandated independents audit in institutions like banks, non-banks, insurance companies and other corporations.
The last line of defense is the audit department. While preserving independence from compliance and business responsibilities, the audit is responsible for providing an objective evaluation of the AML compliance program for soundness, adequacy, and sustainability.
Advantages of AML/CFT Audit are:
Independent audit helps organization to identify urgent matter like non-compliance with laws and also to improve standards to best practices for the prevention of money laundering, the financing of terrorism, as well as fraud and financial crime.
AML Audit helps to identify mistakes and oversights, though ,this type of mistake in itself does not constitute criminal behavior, it does provide an opportunity for the regulators to consider fining the institution for a breach in the law.
It supports corporate governance by strengthening the organization’s system of control. It assures that key controls are designed properly, operate effectively and efficiently to the different layers of management.
AML audit should be risk-based focusing on high risky clients, products, services, geography. It should be able to timely identify deviations from policy, laws, rules and regulations and test the adequacy of internal controls to ensure compliance with AML requirements.
The main objectives of AML/CFT audit are:
Check to see if the entire AML/BSA compliance program is properly developed and operating.
Identify any significant AML program flaws, internal control weaknesses, and opportunities for program, process, and control improvements, and report them to senior management and the board of directors (typically the audit committee).
Assist management in spotting potential money laundering, terrorism financing, and other financial crime risks.
Perform and document procedures and outcomes that regulators may find valuable in conducting supervisory examinations.
Assess and identify potential gaps and opportunities for management to improve its suspicious activity detection, investigation, analysis, escalation, documentation, and reporting processes.
Examine the AML strategic planning method used by management.
Identify possibilities and techniques to assist management in making continuous program improvements.
Examine how well AML compliance is integrated into the business.
Some of the key areas covered by AML/CFT Audit are:
1. AML/CFT Risk Assessment:
AML/CFT Risk assessment should be basis for AML/CFT program.The risk assessment should clearly identify all areas within the organization and specifically identify those Business Units (BUs) within the organization with direct BSA/AML responsibilities. The risk assessment should also clearly identify each BSA/AML responsibility specific to each Business Unit.The risk assessment should include a detailed, in-depth evaluation of the inherent risk of every risk factors like customers, geographies, products, services and systems used or offered by each BU within the organization including an evaluation of the effectiveness of systems and internal controls utilized by each BU and the determination of the resulting AML/CFT residual risk of each risk factors. Any major events or changes that have taken place within the organization should be reflected in the risk assessment, e.g., mergers, acquisitions, expansions, changes in the organization’s footprint/expansion into new markets, new or changes to products or services.
2. Auditing Policies and Procedures
It deals with evaluating whether the policies and procedures are comprehensive, customized, up-to-date, understood and used. The audit should also test that the AML compliance program has been reviewed and approved by senior management and the board of directors. The policies and procedure should mandatorily meet the provisions mentioned in laws and regulations.
3. Customer Identification Program (CIP)
The Customer Identification Program rules of the reporting entity should be in line with the internal policies and procedures of the know your customer (KYC), due diligence and enhanced due diligence (EDD) as per the regulatory requirements. CIP is intended to enable the organization to form a reasonable belief that it knows the true identity of each customer. The reason why KYC or CIP is required is that lack of it leads in failing to adequately represent the customer and may result in inaccurate risk ratings. Frequent or repetitive occurrences of customer accounts with
incomplete or deficient information may indicate systematic weaknesses in the KYC process.
4. Renewals, Updates and Periodic Reviews
Performing periodic risk‐based renewals and maintaining up‐to‐date customer information are critical components of understanding the customer base. This involves looking for changes in KYC information (e.g., expected account activity, employment or business details, business ownership, etc.). Customer profiles with outdated information may indicate additional risk exposure as there may be instances where a customer’s risk rating should be elevated and/or additional information collected. Best practices include updating customer information and reassessing customer risk ratings in accordance with established policies and procedures.
Customer Name Screening see the “OFAC and Sanctions” control section for details on OFAC screening
An essential aspect of “knowing your customer” lies with performing customer name screening and list comparison searches. This function usually occurs at account opening and renewal stages and includes the identification of PEPs, Sanction person or entities or in adverse media.
5.Suspicious Transaction Reporting
Policies, procedures and processes should be in place for referring suspicious activities from all areas of the Business Unit to the personnel or department. This includes establishing and documenting a clear and defined escalation process from the point of initial detection to the completion of the investigation. There should whistle blower channels for employees to refer suspicious activity privately should be available and communicated in policies and procedures. Information provided by FIs is used by Law Enforcement to execute investigations, gather intelligence about emerging money laundering tactics, identify illegal activities and prosecute criminals. Where a decision is made to file a SAR, the quality of the SAR content is critical to the effectiveness of the suspicious activity reporting system. A well‐written and detailed SAR will allow the FI to more effectively manage large volumes of filings and conduct more fruitful examinations of suspect customers or activity. Policies, procedures and processes should reflect standards and guidelines for ensuring that SARs are timely, complete and accurate.
6. Sanctions Screening
Organization should implement automated sanction screening system to prevent bad actor entering or conducting transaction. This can be use at time of on-boarding, passing international transaction and so on.Even with assistance from sophisticated automated solutions and advanced technology, there is often a need to implement manual processes, such as individualized reviews for double checking alerts, confirming false positives, managing data or adjusting and testing screening mechanisms.
7. Training and Awareness
staff should receive AML training in current rules and regulations, Business Unit‐specific information (e.g., products/services, customers, risk profiles, policies and procedures, etc.), targeted and more advanced training that is relevant to roles and responsibilities. Money launderers are constantly evolving and refining their strategies. As such, training should explore recent trends through case studies. The intensity, scope and frequency of training should be commensurate with each employee’s job level and respective duties
8. BSA/AML Department
There should be established a centralized AML/CFT Department responsible for overseeing and implementing the Bank’s BSA/AML Program and monitoring, investigating and reporting suspicious activity. Management should ensure adequate staff and competent staff is allocated.
Although above is not exhaustive list, other things will depend upon the situation organization considering its internal and external environment. If you are interested how to perform AML/CFT audit in these areas, you can go through the following course. The course will take you through AML/CFT audit process from initiation, planning, implementation and completion phases in a fictional company. We have used animation and other creative ways to make your learning journey fun and understandable. This course will help any external or internal auditor who want to do AML/CFT audit, compliance department staffs, to perform AML/CFT monitoring in their organization. Further, this will be useful for the candidates who are pursuing CAMS-Audit.
Risk of AML/CFT audit
To have successful completion of AML/CFT audit auditors need to be aware of the current hot topics that are cause of concerns for regulators and reporting entities. Lapses in AML/CFT audit have been due to inexperienced or inadequately trained testers; audit coverage that was inadequate or not appropriately risk based; insufficient transaction testing; limited understanding and inadequate testing of automated account monitoring systems; and deficient follow-up on previously identified issues.
Therefore, if you want to have proper AML/CFT audit in your organization, hire real experts. Or you can select us, Siorik Consultancy, who have dedicated team of CAMS certified, CAMS-Audit certified, who can help you in this endeavor.
