The Tribune

The Securities Commission yesterday announced that its 2019 licensee examination priorities are anti-money laundering compliance and the appropriate risk-rating of clients.

The regulator’s executive director, Christina Rolle, said release of the priorities is an important element of the commission’s risk-based supervision programme because it provides the industry with insight into what it perceives as the greatest risks.

“As the commission moves deeper into its implementation of risk-based supervision, we want to demonstrate good leadership and be transparent about our risk assessments and observations,” Ms Rolle said.

“This information will help responsible registrants and licensees to ensure they, too, are focused on these areas and, where necessary, that they take appropriate measures to manage those risk factors.”

The Securities Commission’s risk and analytics department, formed in May 2018, will be responsible for the examinations. Lesley Pearson, the department’s manager, said the priority focus areas for 2019 are:

• Anti-money laundering and counter terror financing reviews of financial and corporate service providers: Examiners will be conducting focused reviews of al providers for compliance with applicable anti-money laundering requirements, adequacy of Know Your Customer documentation and the effective management of IBCs, including the maintenance of accounting records.

• Risk management, including a self-risk assessment and client risk-rating framework: The unit will assess the effective implementation of self-risk assessment and client risk-rating frameworks for all licensees, which are now required by the Financial Transactions Reporting Act 2018.

• Business conduct and risk profile: Examinations will include a review of large entities that potentially pose a systemic risk to the jurisdiction. Such firms typically employ a large number of staff, manage a large number of client assets and have operations across multiple industries such as securities, banking and insurance. Examiners will perform an assessment of other identified risk areas, including new product lines introduced by its registrants, capital adequacy levels and corporate governance.

• Cyber security: All examination programmes will include a review of cyber security with an emphasis on disaster recovery; data management and accessibility; data protection and retention; as well as proper configuration of network storage devices.

In determining its priority examination areas, the Securities Commission said it was guided by deficiencies identified in The Bahamas’ most recent mutual evaluation from by the Caribbean Financial Action Task Force (CFATF); the passage of the Register of Beneficial Ownership Act 2018 and the Commercial Entities (Substance Requirements) Act 2018, and the results of the 2018 preliminary risk rating exercise for all licensees and registrants.

However, the priority areas are not the sole risks that will be addressed in the Securities Commission’s examinations. Under a risk-based supervisory approach, the nature and scope of any on-site examination is determined by the potential risk in a licensee’s operations, products offered, financial position and other factors.

The risk-based approach helps to focus the Securities Commission’s attention where it perceives the greatest risk across more than 150 registered firms, nearly 1,000 investment funds and fund administrators, and over 350 financial and corporate service providers.

Examination results serve to enhance the Securities Commission’s risk monitoring process as well as improve industry standards, and identify and address areas of market misconduct.