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WHT/082311 Risk Assessment and Due Diligence – A Global Perspective Presenters: John J. Byrne, Esq., CAMS, Executive Vice President, ACAMS Sheryl Austin, CAMS, LexisNexis Market Planning – AML/Compliance 18th Annual International AML & Financial Crime Conference March 18-20, 2013

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Page 1: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

Risk Assessment and Due Diligence – A Global Perspective

Presenters: John J. Byrne, Esq., CAMS, Executive Vice President, ACAMS

Sheryl Austin, CAMS, LexisNexis Market Planning – AML/Compliance

18th Annual International AML & Financial Crime Conference

March 18-20, 2013

Page 2: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

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Geographic Footprint

Financial Institution’s Asset Size

Respondent’s Title

Demographic Composition

ACAMS and LexisNexis Survey

Page 3: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

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Time Consuming and Complex

Lack of Standardization

Inconsistent Regulator Expectations and

Management Support

What do you believe is the most difficult industry-wide challenge in the BSA/AML Risk Assessment Process?

ACAMS and LexisNexis Survey

Page 4: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

The BSA/AML Risk Assessment Process is challenging because it is: Time Consuming and Complex

4 ACAMS and LexisNexis Survey

Product Development

Customer Experience

BSA/AML Survey Highlights The “VOICE” of the AML Audience

“The risk assessment is a very large task and each year gets larger. The time involved to complete the assessment is often overlooked…”

“BSA is no longer genuinely risk-based. There are so many things that MUST be done regardless of the risk assessment, it is exhausting.”

“[The most complex issue is] combining expectations from different regulators/countries”

• 65% spend more than 1 month on their risk assessment (18% spend 4 months or longer)

• 62% use a manual spreadsheet or document for their risk assessment

Page 5: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

The BSA/AML Risk Assessment Process is challenging because it: Lacks Standardization

5 ACAMS and LexisNexis Survey

Product Development

The “VOICE” of the AML Audience BSA/AML Survey Highlights

“…there are unclear expectations as to the preferred format, frequency and purpose of the risk assessments”

70% see a need for an industry-wide standard risk assessment

“There is no standard; the entire assessment is subjective… and once the process is complete, it is time for a NEW auditor to review it”

“Lack of standardizing along with lack of time and staff internally to properly attend to these requirements”

Page 6: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

The BSA/AML Risk Assessment Process is challenging because of: Unknown Regulator Expectations AND Lack of Management Support

6 ACAMS and LexisNexis Survey

Product Development

Customer Experience

The “VOICE” of the AML Audience

“One of the largest concerns is that this assessment will be reviewed in hindsight by regulators…”

“[Lack of] management understanding of the risks that the compliance staff see and their buy-in to the importance of the risk assessment”

“[Lack of] consistency of standards applied by examiners/regulators”

“The Risk Assessment Exercise often does not elicit support [from management]”

Page 7: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

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Unavailable data

Reluctance to gather AND share information

A manual process and unintegrated systems

What do you believe is the most difficult industry-wide challenge in the Enhanced Due Diligence (EDD) Process?

ACAMS and LexisNexis Survey

Page 8: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

The most difficult industry-wide challenge in the EDD Process is: Reluctance to Gather AND Share Information

8 ACAMS and LexisNexis Survey

Product Development

Customer Experience

Over 60% use a dialogue between a customer and a bank employee as their PRIMARY method for collecting EDD data

“Maintaining a balance between the Financial Institution's responsibility to protect the bank and customer's expectation for financial privacy“

The “VOICE” of the AML Audience BSA/AML Survey Highlights

“Getting the line of business to ask/gather information on the

customer”

“The customer is reluctant to provide detailed information and the front line employee has difficulty with asking the EDD questions”

Page 9: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

9 ACAMS and LexisNexis Survey

The most difficult industry-wide challenge in the EDD Process is: Lack of Available Data

Lack of Available Data was described as:

• Lack of general EDD data

• Lack of information across foreign jurisdictions

• Lack of beneficial ownership

“Getting clear answers and detail when [data is] unavailable”

“Information is scarce… [and] may be in a foreign language”

“Obtaining negative news from all foreign countries on a continuous basis”

“The lack of transparency in the various jurisdictions in terms of corporate ownership”

“Determining the beneficial ownership when companies use Corporate Vehicles that distort [information]…”

The “VOICE” of the AML Audience

Page 10: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

10 ACAMS and LexisNexis Survey

Product Development

Customer Experience

The most difficult industry-wide challenge in the EDD Process is: A manual process and un-integrated systems

The “VOICE” of the AML Audience BSA/AML Survey Highlights

• 40% on disparate systems which at best are partially integrated with each other

• Only 5% have a fully automated system

“Few vendors offer CDD/EDD software solutions that can be integrated into BSA/AML systems”

“The real pain is to collect the right information, to store it in the same place and to have updating processes”

“There are too many manual processes in place to manage the EDD process”

“[lack of]…information and mapping the relationship together to identify the risks associated with the relationship”

Page 11: Risk Assessment and Due Diligence A Global Perspective · ACAMS and LexisNexis Survey 10 Product Development Customer Experience The most difficult industry-wide challenge in the

WHT/082311

11 ACAMS and LexisNexis Survey

Next Steps / Contacts

• ACAMs and LexisNexis will develop a more thorough report related to the results of the survey.

• This report will be published and made available to ACAMS members and survey participants by April/May.

ACAMS John Byrne Executive Vice President [email protected]