Corporate Governance

ANTI-MONEY LAUNDERING:
The Criminal and Regulatory Framework, and Anti-Money Laundering Compliance Programs (Part 7)


This article is the final part in our most recent corporate governance series. If you missed part 6, you can read it online here: Anti-Money Laundering Part 6

6. WHAT ROLE DOES TOP MANAGEMENT HAVE IN ADMINISTERING AN ANTI-MONEY LAUNDERING COMPLIANCE PROGRAM?

The success of any compliance program depends upon the support and involvement of top management. Not surprisingly, the Treasury Department regulations requiring certain "financial institutions" to implement Anti-Money Laundering Programs thus expect the company's board of directors and senior management to issue the policies and procedures designed to implement the Compliance Program itself, as well as those designed to deter and detect money laundering. Top management is also expected to monitor, at least through the periodic independent audit, the operation of the Program. While clearly not applicable to all businesses, the regulations establish a basic standard for the role of top management.

In addition to establishing the Program and issuing the appropriate policies and procedures, the board of directors, or at least the senior management, should appoint the Compliance Officer. The Compliance Officer should report directly to senior management and the board.

It is the duty of the board and senior management to ensure that the Compliance Officer is qualified, and that he or she has the necessary resources (in terms of budget and staff) to perform the assigned duties. The board and senior management need to understand the content and operation of the Compliance Program and exercise reasonable oversight with respect to its implementation and effectiveness. The board and senior management should thus generally supervise the Compliance Officer, and receive periodic reports from him or her concerning the operation of the Compliance Program and any updates or changes needed in company policies and procedures. The individual delegated day-to-day operational responsibility should report periodically to senior management and shall have direct access to the board of directors.

7. WHO SHOULD ADMINISTER THE ANTI-MONEY LAUNDERING COMPLIANCE PROGRAM?

Several different departments within the company may have significant roles to play in the day-to-day operation of the Compliance Program, including the company audit or accounting department, the security department, human resources, and the legal department. However, their various compliance efforts must be coordinated as part of a single program, so the Compliance Officer should be responsible and accountable for overseeing the company's compliance efforts. Again, in order to accomplish this task and ensure the smooth and effective operation of the Compliance Program, the Compliance Officer needs to have sufficient line authority and resources.

8. WHAT ARE THE ACTUAL STEPS A COMPANY MUST TAKE TO CREATE AN EFFECTIVE ANTI-MONEY LAUNDERING COMPLIANCE PROGRAM?

The regulations provide no guidance on how to create an effective Anti-Money Laundering Program. Reference to the United States Sentencing Guidelines, however, provide some direction that, at a minimum, a company should take:66

(1) Establish policies, standards and procedures to prevent and detect money laundering;

(2) Conduct a risk assessment based on the company's products, services, customer base and geographic location(s), and develop specific risk-based procedures to meet the perceived risk areas. A risk assessment is not a one-time-only exercise. It is a continuing process that continually takes into account changes in methods of money laundering, new products or services offered by the company, changes in the company's customer base and geographic areas of operation, and changes in the law or applicable regulations;

(3) Ensure that the company's Board of Directors and Senior Management understand the content and operation of the Compliance Program and exercise reasonable oversight with respect to its implementation and effectiveness. Specific senior manager(s) should have overall responsibility to ensure the implementation and effectiveness of the Program. A Compliance Officer should be delegated at the outset to conduct or supervise the risk assessment, develop appropriate procedures, and oversee the drafting, implementation and day-to-day operation of the Program. This person should be afforded adequate resources and authority to accomplish these tasks.

(4) Take reasonable steps to ensure that the Compliance Officer and his or her staff are adequately knowledgeable about the business, money laundering and applicable statutes and regulations. Also ensure that the Compliance Officer and his or her staff are of the highest integrity by screening out persons whom the company knows, or should know through the exercise of due diligence, have a history of engaging in illegal activity or other misconduct;

(5) Take reasonable steps to communicate periodically and in a practical manner the company's its standards and procedures to all officers, employees and, as appropriate, its agents, through effective training programs and otherwise disseminating information;

(6) Take reasonable steps to (a) ensure that the program is followed, including using monitoring and auditing to detect criminal conduct; (b) evaluate periodically the program's effectiveness; and (c) have a system whereby employees and agents may report or seek guidance regarding potential or actual criminal conduct without fear of retaliation (although a mechanism for anonymous reporting is not required);

(7) Promote and enforce the program through appropriate incentives and disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct; and

(8) Take reasonable steps to respond appropriately to money laundering by customers and to prevent further similar conduct, including making any necessary modifications to the compliance and ethics program.67

9. IS THERE A STANDARD ANTI-MONEY LAUNDERING COMPLIANCE PROGRAM THAT MY COMPANY CAN EFFECTIVELY USE?

There is no such thing as a "one size fits all" anti-money laundering compliance program. An effective program must be based on a risk assessment that is specific to each company. Each company must examine the nature of its business, its products and services, its customer base and the areas in which it operates in order to determine its potential exposure to money laundering, and the policies and procedures it adopts must be designed based on that company-specific analysis. Each company must prioritize the risks that it faces in terms of the degree of money laundering risk associated with its products, services, locations and customers.

Our thanks to this article's author, Greg Baldwin of Holland & Knight.

Holland & Knight is a global law firm with more than 1,150 lawyers in 17 U.S. offices. Other offices around the world are located in Beijing and Mexico City, with representative offices in Caracas and Tel Aviv. Holland & Knight is among the world's 18 largest firms, providing representation in litigation, business, real estate and governmental law. Our interdisciplinary practice groups and industry-based teams ensure clients have access to attorneys throughout the firm, regardless of location. www.hklaw.com

Greg Baldwin practices in the areas of complex commercial litigation and white collar criminal defense. He specializes in the Foreign Corrupt Practices Act, U.S.A. Patriot Act, the Bank Secrecy Act, the Money Laundering Control Act, and OFAC regulations, as well as anti-money laundering and OFAC compliance program development and implementation. Mr. Baldwin is a Certified Anti-Money Laundering Specialist. Gregory.Baldwin@hklaw.com

DISCLAIMER: This Corporate Governance article is provided as an informational resource and does not constitute legal advice. The information provided in this article is based on the laws in effect at the time the article was published. Laws related to this article's topics may change over the course of time. Visitors to this website should not rely upon or act upon this information without seeking professional legal counsel.

66 USSG § 8B. 24
67 USSG § 8B2.1(b).

 

Follow Maximize on:

Maximize Blog Maximize on Facebook Follow Maximize on Twitter

Corporate Governance
is critical to the health and well being of every company.

Receive our Corporate Governance Series.
There is no cost to you.





We respect your privacy.

Memberships
Certifications



Turnaround
Management
Association







Volusia
Manufacturers
Association






AMERICAN
BANKRUPTCY
INSTITUTE








Home | About Us | Marketing and Sales | Financial Management | Operations HR | IT | Our Team
Maximize Management Blog | Corporate Governance Articles | Code of Ethics | References | Contact Us | Sitemap

© 2007, MAXIMIZE Management, Inc. All Rights Reserved