Compliance Tips and Enforcement of AML Best Practices

CySEC recently issued a number of circulars, their main objective being to help firms get prepared for on-site inspections and the enforcement of best practices. It appears that the regulator is putting emphasis on proactively encouraging firms to ensure compliance with the Anti-Money Laundering (AML) and Financing Terrorism Law.

In this commentary we summarize the compliance tips we distilled from the regulator’s notes and help you get prepared for;
– the annual Compliance and AML reporting obligations,
– an on-site inspection from MONEYVAL, and
– enforcing best internal practices.

Within Circular C300, dated 8th of March, CySEC calls all firms (including CIFs, ASPs, internally managed investment funds, and external investment fund managers) to get prepared for an evaluation visit from MONEYVAL, with the main scope being to assess the level of effectiveness and compliance of Cyprus with the AML/CTF framework. The visit is expected to take place during May 2019 and internal teams shall get themselves prepared to receive an on-site inspection by the monitoring body. The regulatory body provides guidance and special attention to the FATF recommendations and the Immediate Outcome 4 of the FATF methodologies.

Firms must adequately assess and understand the nature and level of risks arising from money laundering and terrorism financing. This is in order to create appropriate policies, controls, risk mitigation and record keeping programmes; necessary in applying suitable KYC due diligence (simplified and enhanced) and in identifying along with reporting suspicious transactions to MOKAS.

It is critical that internal teams
1. adherence to the identified weaknesses and/or deficiencies from the on-site inspections in relation to money laundering and terrorism financing,
2. provide recommendations for corrective measures, and
3. present the implementation of them, if any.

For the said preparation, CySEC advises firms to adhere to
– all circulars issued, relating to money laundering and terrorism financing,
– the risk-based approach guidance, and
– the Cyprus national risk assessment (NRA) report.

Additionally, the below checklist provides a high-level preparation guidance;
– Write down the firms’ background and business activity,
– Describe the money laundering and terrorism financing risks arising from the business activity,
– Provide evidence of the identification assessment, review, and mitigation measures taken for the money laundering and terrorism financing risks,
– Explain the internal controls and procedures which enforce compliance,
– Provide a detailed description of the preventive measures and procedures of the onboarding of clients and KYC procedures of client due diligence,
– Provide evidence of rejected accounts (if any) due to incomplete information,
– Describe the procedure to identify the beneficial ownership and the taken actions when such identification cannot be established,
– Explain the procedures for identification of the politically exposed persons (PEP),
– Describe the risks arising from cross-border banking or wire transfers and the mitigating actions,
– Provide evidence of rejected transactions due to insufficient information from wire transfers,
– Document checks performed for verification of clients’ activities not being subject to targeted financial sanctions,
– Describe the firm’s approach towards the high-risk countries and the conducted risk assessment,
– Describe with details the staff training schedule in relation to money laundering and terrorism financing,
– Explain the level of guidance and feedback provided by any organization in regards to money laundering and terrorism financing.

We hope this article is of help for your adherence with the anti-money laundering regulation and in preparation for any upcoming inspection. If you require more details, please let us know.

The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.

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