HOW DO WE ALIGN OUR AML COMPLIANCE PROGRAM WITH OUR OVERALL BUSINESS STRATEGY AND OBJECTIVES

As much as the global economy has expanded and advanced, so are financial crimes that threaten the global economy and put at risk businesses of different sizes. Money laundering has over the years, become one of those financial crimes that has become so dreadful to the existence of businesses in different parts of the world and it is imperative that stakeholders put measures in place to curb this menacing and ravaging plague; otherwise, the global economy will be in shambles. This is why regulators, business leader and finance gurus have come together to postulate regulations and policies that companies must adhere to in order to combat the risks of money laundering.

Complying with AML regulations is important for businesses to achieve their set out organizational business objectives, but some organizations find it hard to incorporate AML strategies into the overall strategy, thereby leading to noncompliance and the penalties that come with it. Cohesively aligning AML strategies with overall corporate strategy is essential for creating a cohesive and proactive organizational approach to compliance and business in general. This alignment ensures that AML policies and practices do not operate in isolation but are integral to the corporate governance framework.

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The Intersection of AML Compliance and Overall Business Objectives

To achieve a cohesive alignment of anti-money laundering and overall business objectives, it is important that organizations recognize and understand the mutual relationship that exists between these concepts. While your business objectives encompass revenue growth, market expansion, or innovation, your AML compliance program should be designed to accommodate and support these goals rather than be an impediment to them.

Integrating AML compliance into your strategic decision-making processes helps you to easily identify potential risks and spot opportunities associated with your business objectives. This proactive approach enables you to implement appropriate controls and safeguards that strike a balance between compliance requirements and achieving your overall business goals.

Furthermore, implementing a solid AML compliance program can enhance your reputation and credibility in the marketplace. Customers, investors, and business partners are more likely to trust and engage with organizations that demonstrate a commitment to preventing money laundering and terrorist financing. By prioritizing AML compliance, you can differentiate your business from competitors and attract stakeholders who value ethical and accepted standard practices.

In addition, an effective AML compliance program can help you mitigate legal and regulatory risks. Non-compliance with AML regulations can result in severe penalties, fines, and reputational damage. By implementing robust compliance measures, conducting regular risk assessments, and staying updated on regulatory changes, you can minimize the likelihood of non-compliance and protect your business from legal consequences. By incorporating AML compliance into your business strategy, you are setting the foundation for robust financial management, keeping up with corporate governance codes, and protecting your organization from financial and reputational damage.

Essential Factors to Consider When Aligning Your AML Compliance with Your Overall Business Strategy

Building a sound AML/CFT program that aligns perfectly with business strategy and objectives should be based on a full understanding of the context of the organization and risks faced by such organization, relevant regulatory requirements, regulatory guidance, and the potential impact of noncompliance. An AML/CFT program must incorporate all national and international standards, requirements and expectations. Businesses must embrace international best practices (e.g the FATF 40+9 Recommendations), in order to achieve a cohesive AML compliance program that contributes to achieving overall business goal.

Explained below are various factors that businesses, no matter the size, must consider in order to achieve well-rounded alignment in their AML compliance strategy and overall business strategy and objectives;

1.????? Governance: In achieving a robust AML compliance program, a sound and outstanding governance structure is the foundation of an effective AML/CFT program and will include the board of directors and senior management setting the tone at the top, hiring a qualified chief AML/CFT officer, and providing adequate resources for the three lines of defense. According to International Finance Corporation, the “tone at the top” is a public commitment at the highest levels of the organizations to complying with AML/CFT requirements as part of its core mission and recognition that this is critical to the overall risk management framework of the company.

2.????? Risk Management: It is important that organizations have a thorough understanding of the specific Money laundering risks they face through a periodic enterprise wide AML/CFT risk assessment. Although there are several approaches to performing an AML/CFT risk assessment, these approaches all commonly include the following three phases: Risk Identification, Risk assessment and Risk Mitigation. Having a robust risk management framework helps compliant organizations to seamlessly identify the AML risks that are peculiar to their business.

3.????? Policies and Procedures: What is a robust AML compliance programs without policies, procedures, and internal controls. To achieve a perfect compliant posture, organizations must design policies, processes, procedures and internal controls to mitigate the inherent risks identified by the risk assessment. They should address the unique risks and the organization’s risk profile. AML policies and procedures should be in writing and serve the purpose of preventing, detecting, and reporting potentially suspicious activity, complying with local laws, and establishing a strong internal control and risk management environment. The AML policies and procedures must be designed based on a risk-based approach.

4.????? Customer Identification and Due Diligence: The need to know who you are in business with will always be a major pillar that holds an effective AML compliance program. Businesses and organizations must conduct customer identification and due diligence when onboarding a new customer, as well as update CDD throughout the relationship with the customer. ?This process involves a robust Know-your-customer (KYC) program. The KYC program must be tailored online with regulations that guide KYC in such entity. This regulation include but limited to industry-specific KYC regulations, international KYC standards and best practices.

5.????? Transaction Monitoring: In order to ensure that transactions carried out by client are consistent with the profile of the client and there are no suspicious activities, businesses must ensure to monitor transactions of their customers, so as to spot and avert threats to the system. Transaction monitoring involves manual or electronic screening of transactions based on certain parameters (for example, customer and beneficiary names, and volume, value, country of origin or destination of transactions) to determine if they are consistent with the organization’s knowledge of the customer. Transaction monitoring is intended to alert the organization to unusual business relationships and activity, enabling the business to meet its statutory obligations with respect to reporting potentially suspicious transactions. To achieve an optimum level of AML compliance program, businesses must ensure that there are mechanisms in place to monitor customers’ transaction to mitigate the risk of money laundering.

6.????? Reporting: An essential component of an effective AML compliance program is s providing authorities reports on important financial transactions. The organization’s regulatory requirements typically include suspicious-transactions reports and large currency transaction reports. To meet these obligations, businesses must have adequate policies, procedures, and systems in place to be able to provide the required reports to appropriate governmental agencies (external reporting) and also to internal stakeholder(s) who is an interested party to such report.

7.????? Communication and Training: it is impossible to design an AML compliance programs that aligns closely with the overall business objective without clear and routine cross-organizational communication and the training of appropriate personnel.? Organizations are expected to develop mechanisms for sharing relevant information across the entire institution. The scope and frequency of training should be tailored to the level and nature of risk present in the bank and the risk factors to which employees are exposed because of their responsibilities. These trainings must be high-quality, effective, obligatory and ongoing.

8.????? Continuous Improving and Testing: Provisions must be made for the ongoing monitoring of the all components of the AML programs. This encompasses assessment of AML compliance, review of exception reports, and reporting of main compliance failures to the board and/or senior management.

9.????? Internal and External Audit: The review of the AML program by an external party who is independent of the implementation process is important to the success of such AML program. Internal audit is a component the third line of defense (according to the Institute of Internal Auditors, IIA) that independently evaluates the AML program and processes carried out by the first and second lines of defense. Senior management is to ensure that auditors are qualified, independent, and do not have conflicting business interests/responsibilities that may influence the outcome of the audit. ?

To develop a comprehensive AML compliance strategy that supports your business goals, it is essential to integrate AML considerations into your broader strategic planning process. Rather than treating AML compliance as a standalone function, it should be an integral part of your overall risk management framework.

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