aml/cft regulation in light of global financial crisis presented by muhammad baasiri sic secretary...
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AML/CFT Regulation in Light of Global AML/CFT Regulation in Light of Global Financial CrisisFinancial Crisis
Presented by Presented by Muhammad BaasiriMuhammad Baasiri
SIC SecretaryUS-MENA PSD Chairman
MENAFATF 1st Year President
11stst Annual Compliance & AML Seminar Annual Compliance & AML SeminarRiyadh, Kingdom of Saudi ArabiaRiyadh, Kingdom of Saudi Arabia
2424th,th, 25 25thth March 2009 March 2009
Reasons behind Global financial Crisis Impact on AML in light of Global financial Crisis Challenges facing AML in Light of Global Financial Crisis
Accountability for the Global Financial Crime, Rethinking/redefining of AML
Optimal Allocation of Human & Monetary Resources
Cooperation between Developed & Developing countries
Adequate priority to AML ProgramRegulatory framework to prevent future financial
crisis Conclusion
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OutlineOutline
1) Collapse of US-sub-prime mortgage market2) Poor judgment by borrowers and/or lenders, 3) Speculation & overbuilding during the boom period, 4) Complex financial products & Risky mortgage products, 5) Inaccurate Credit Rating6) High personal and corporate debt levels, 7) Central Banks’ restrictive monetary policies in a number
of countries, 8) Governments regulation or the lack of9) Stock market volatility, downward currency values10)Moral Hazard, abundance of greed, & corruption
Reasons behind Global financial Crisis
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1) Significant investment in AML systems and controls due to increase in transaction monitoring and staffing
2) High Demand for forensic services, fields of fraud & litigation
3) More risk-based AML programs, 4) Restructuring AML regime by centralization or
outsourcing functions5) Advanced AML software systems
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Impact on AML/CFT in light of Current Financial Crisis
I. Accountability for the Global Financial Crime, Rethinking/redefining of AML
II. Optimal Allocation of Human & Monetary Resources
III. Maintaining International CooperationIV. Adequate priority to AML ProgramV. Regulatory framework to prevent future
financial crisis
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Challenges facing AML in Light of Global Financial Crisis
Banking Regulators; who are guilty of systematic failure to spot the early signs of dangerous dependence on inter-bank funding, heavy exposure to mortgage debt, soaring house price inflation, & complex financial products
Hence The Role of banking Regulators; To be prudent by protecting depositors, To monitor systemic risk reduction of disruption from adverse trading
conditions for banks To Avoid misuse of banks for criminal purposes (securities fraud, stock
manipulation schemes, embezzlement by stockbrokers , corruption, misuse of power & laundering the proceeds of crime)
To Protect banking confidentiality (even from Insider trading) Credit allocation - to direct credit to favored sectors
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I. Accountability for Global Financial Crisis
Corporate CEO’s; guilty of Greed that clouds judgment (excessive pay, bonuses, & preferred shares)
Credit Rating agencies; who faced inherent conflict of interest with many of their clients issuing securities rated by their analysts,
Investors; guilty of wanting all with no leverage to back up their debts
Lenders: failed to make sure borrowers had a job or income to cover for their loans
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I. Accountability for Global Financial Crisis (continued)
In light of financial Crisis, comes the need to have a broader understanding of money laundering, what constitutes illicit money, how they are concealed, & introduced into the financial system, which channels are currently used, how they are invested
To expand AML predicate offenses to include all the designated categories of offences such as Insider trading, market manipulation, corruption & bribery
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Need to Redefine AML
Global Economies are in recession, consequentlyconsequently Limited, Depleted & Expensive financial & human
resources available for AML, hencehence Need to intelligently allocate resources in AML regime,
throughthrough Outsourcing or centralization of AML functions or or
throughthrough Training, Raising Awareness as criminals are constantly
evolving and and Increasing sophistication of law enforcement
professionals such as AML experts, fraud examiners, compliance officers, forensic accountants, experienced professionals in money laundering investigations
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II. Optimal Allocation of Human & Monetary Optimal Allocation of Human & Monetary ResourcesResources
Despite the lack of enough trust between countries and regulators, they should be looking at:
Exchanging intelligence, expertise & lessons learned, Stepping up assistance to jurisdictions that are struggling
to establish their regimes, Implementing streamlined procedures in freezing,
confiscating, & returning the ML assets Helping develop technical assistance programs Forge consensus on global strategies that can adequately
serve the different needs of the global market?10
III. Maintaining International Cooperation
Banks and other financial institutions have to take a more holistic approach to AML,
Improved controls – Existing and expected evolving regulatory requirements demand better financial controls
Need to be more proactive to identify and catch illicit funds
High Fraud level in economic crisis, places additional pressure on banks & financial institutions to have transparent governance, adequate screening of clients, proper KYC forms, and AML regime in place
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IV. Awarding adequate priority to AML Regime
Implement New regulatory framework to prevent future similar financial crisis
Establish appropriate preventive measures to mitigate against such huge losses, reform-measures
Effective and comprehensive reform of the international monetary & financial systems
Enhanced regulation through adequate standards, transparency, accountability & oversight
Improving risk management practices Improving valuation standards of complex financial
instruments12
V. Preventive Regulatory Framework
During economic downturn, adequate screening systems become more important . Fraud tends to gather pace in a credit crunch & has much greater impact during crisis.
With white collar crime increasing and regulators handing down penalties against both companies and individuals for anti-money laundering lapses, the need for systematic, rigorous screening of customer databases has never been more important.”
Conclusion
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Thank You
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