Company boards under AML spotlight
Attorney Caroline Hay, QC, says while it is evident that the costs of anti-money-laundering compliance far outweigh the overall gains from prosecutions, it’s an obligation that organisations must pursue.
And regulators are now turning their spotlight on company boards, she warned business and financial interests on Thursday over breakfast.
Quoting writer Charles Kenny, who said the global anti-money-laundering, or AML, system “snares just a fraction of one per cent of criminal income flows,” Hay said the question to be asked by organisation heads was not how much it was costing, but what would be the cost of not complying. Kenny himself cited numbers from a 2006 study, that global AML transactions are at least two per cent of global GDP, or roughly US$1.5 trillion. Amounts seized in AML efforts is less than 0.2 per cent of all laundered money.
“In the end, it appears not to be a discussion at all about balancing corporate objectives with regulatory imperatives … It’s simply compliance, as non-compliance is not a real option,” Hay said at an AML breakfast seminar hosted by the Jamaica Bankers Association and the Jamaica Institute of Financial Services.
The attorney noted that the latest BOJ guidance notes issued in 2017, although not gazetted, lay greater emphasis on the responsibilities of boards to inform themselves of AML requirements.
“While the board of directors may not require the same degree of training as banking operations personnel, they need to understand the importance of Banking Services Act/AML regulatory requirements, the ramifications of non-compliance, and the risks posed to the bank,” she said, quoting from the guidance notes.
Hay said that without a general understanding of the Banking Services Act, BSA, the board of directors cannot adequately provide oversight; approve AML policies, procedures, and processes; or provide sufficient AML resources.
Compliance, she added, is often pursued in silos, with separate staff, and the board uninvolved.
But now, she warned, boards are required to inform themselves and are liable for prosecution if found to be otherwise.
The BOJ requires in its guidance notes that each financial institution produce a compliance manual for distribution to staff. Hay said the management of the financial institution should review this manual at least annually and make appropriate revisions and enhancements when necessary.
“The board should review and ratify the manual and all subsequent revisions and the overall effectiveness of the company’s AML/CFT systems, including those of its subsidiaries and branches, whether located in Jamaica or overseas,” she said.
In addition to guidance notes, relevant AML legislation referred to by the attorney included the Proceeds of Crime Regulations 2007, Proceeds of Crime (Money Laundering Prevention) Regulations 2007 (as amended in 2013), and the Terrorism Prevention (Reporting Entities) Regulations 2010.
“if regulators are satisfied that directors are fulfilling their fiduciary responsibilities, it should help insulate them from personal liability. However, failure to satisfy the regulators could be a road map to personal liability,” she said.
Companies may want to concern themselves with containing cost and taking profit improvement measures, Hay noted.
However, she added, “there are no options outside of criminal charges for the regulated sector for failure to comply”.