The Tribune

By DEREK SMITH JR

Life is about perspective and so is business. There were various public comments denouncing the European Commission’s actions when it last week essentially “blacklisted” The Bahamas yet again. What appears to have concerned both public officials and private enterprise is the commission’s flagrant disregard for the impact of the COVID-19 pandemic. The pandemic has delayed the Financial Action Task Force’s (FATF) planned review of The Bahamas’ improvements to its anti-money laundering and counter-terror financing regime. This is especially relevant because The Bahamas was in an “exit process” that requires an FATF site visit, which has been delayed by COVID-19. Yet, the commission’s decision to blacklist this nation is largely based on it remaining under FATF scrutiny.

While I have strong views regarding the apparent bullying tactics used by the Commission, the European Union’s (EU) civil service, and their infringement on our sovereignty under the guise of an EU action plan to prevent money laundering and terrorist financing, I would prefer risk and compliance professionals shift their focus to ensuring their internal due diligence and anti-money laundering programmes are robust.

As the government navigates unprecedented economic and fiscal pressure, compliance professionals must ensure their programmes are strengthened during and after this pandemic. A compliance programme should be designed to adequately address the legislative environment in which the financial institution finds itself. I believe there are several factors that distinguish an “average” programme from a “robust” programme.

Tone from the top (culture)

Culture is at the core of the risk and compliance environment. Scandals potentially lie around every corner in today’s environment. Maureen Mohlenkamp, principal with Deloitte Advisory, noted in a 2015 release: “Fundamentally, culture is about how things get done in an organisation. The power of culture can be extraordinary.” Therefore, cultivating a value-based approach is needed during this pandemic and after as it will reinforce principles of integrity and ethics while completing tasks.

Procedures and training

Your suite of anti-money laundering compliance policies and procedures is extremely important. Reviewing them during this pandemic to ensure they remain appropriate, agile and adequate may be a good idea. Ensuring these documents are accessible to all employees, and easy to follow, will assist with adherence to them. Developing communications strategies around policies and procedures will help employee familiarity with the information. Training can take the form of virtual sessions considering the social distancing environment. Compliance professionals must also ensure training is targeted at the various levels in your company. Furthermore, training schedules should be designed for all facets of the institution.

Assessment regime

The anti-money laundering processes and procedures must, at a minimum, meet the respective guidelines of the jurisdiction in which your institution does business. Your money laundering and terrorist financing assessment strategies will be pivotal when determining the potential risk to the institution and how the client should be treated throughout their relationship with you. Moreover, an adequately designed risk-based approach could lead to more efficient management of the customer on-boarding process.

Chief compliance officer (CCO)

Sourcing for this position should not be taken lightly. A chief compliance officer must have a combination of skills inclusive of expert knowledge of the regulatory environment, compliance analysis tools, and the ability to demand respect at all levels of the institution. The person selected is a powerful statement about the company’s commitment to ethics and compliance. Moreover, their placement in the company’s structure sends positive or negative signals to the regulator regarding the tone at the top.

Testing and monitoring

The COVID-19 pandemic has not halted the regulatory requirements to continuously monitor the risks associated with your business. Financial institutions should have independent evaluations and testing annually, and reports provided to senior management and the audit committee on the effectiveness of the anti-money laundering compliance initiative. The internal monitoring of reports enables the quick identification of anti-money laundering violations, which allows for corrective action plans to be designed and implemented before the regulator arrives for their reviews.

This pandemic period — though disruptive in numerous unanticipated ways— can be considered an opportunity or a threat. I encourage my colleagues to think positively and reflect upon their compliance programme, both as it operates now and how it can adapt in future uncertain times.

NB: Derek Smith Jr is the compliance officer at a leading law firm in The Bahamas, and a former assistant vice-president, compliance and money laundering reporting officer (MLRO), at an international private bank. His professional career started at a ‘Big Four’ accounting firm and has spanned over 15 years, including business risk management, compliance, internal audit, external audit and other accounting services. He is also a CAMS member of the Association of Certified Anti-Money Laundering Specialists (ACAMS).