Everybody has relatives or friends who tell them about different kinds of audits and how risky those are for an organization. Anti-Money Laundering (AML) compliance audits tend to be not the most pleasant of those insider tasks, and all personnel within a financial institution have to be familiar with the term and sometimes even actively participate in the procedures. AML courses can help you feel much more confident, by the way.
In any case, sufficiently planning for an AML compliance audit is important for every financial institution in which legal and regulatory departments have their world of wonderful compliance programs. Here is why, and more importantly, how it can be done, assessing the approach for AML compliance audits.
Getting Familiar with the Audit Process
The first step that needs to be done when preparing for an AML compliance audit is to familiarize yourself with the audit process. This implies knowing what documents the auditors will want to see and the yardstick they will use in determining the organization’s level of compliance. Normally, there will be three stages for carrying out the audit process as follows:
- Pre-Audit Planning: Auditors communicate with your compliance team to outline objectives and expectations.
- Document Review: They assess internal rules, measures, and other records relevant to AML compliance.
- Interviews and Observations: Auditors conduct interviews with departments within the company and conduct an operational assessment to understand the compliance mechanism utilized within the organization.
Being accustomed to this process, you can easily cut down on your preparation activities.
Reassess Your Compliance with the AML Policies and Procedures
Prior to commencing the audit, ensure that your AML policies and procedures are reviewed. Conduct a review of the AML policy and report cross-reference to the latest legal requirements as well as changes in custom and practice. Specific areas that require special consideration include the following:
- Risk Assessment: Validate that your risk assessment processes are sustainable and consistently maintained.
- Customer Due Diligence (CDD): Seek effective measures, policies and strategies which will enable you to carry out proper CDD with regard to high-risk customers.
- Monitoring and Reporting: Conduct risk assessments to determine the level of risk posed by clients and the requisite actions to mitigate that risk.
Overhauling these documents shows that you will take the necessary actions to remain compliant with the policies, and you will also aid in the recognition of any policies that are missing and need to be put in place.
Conduct Internal Audits
Carrying out internal audits beforehand prevents unnecessary inconveniences during the official AML compliance audit. This procedure helps detect any deficiencies in your AML program and allows you to correct them. With respect to the internal audits, the following should be considered.
- Assess Compliance Areas: Identify the most sensitive areas that require monitoring and reporting, such as transaction monitoring and record keeping.
- Evaluate Training Programs: The organization implements training concerning the AML policies and procedures.
- Review Documentation: Ensure that the required documentation is present, well-organized, and available at hand.
Implementing improvements that were raised during internal audits will help you during the official audit.
Forward Plan for Staff Training
Staff training is necessary for any company’s AML program. All staff should thoroughly understand these regulations, particularly the compliance and risk management members. For instance, it would be important to:
- Conduct Regular Training Sessions: Implement periodic training for employees regarding AML policies and corporate directions.
- Conduct Role-Based Training: Organize training based on job functions with regard to AML compliance.
- Conduct Tests and Assessment of Knowledge: Influence the knowledge of the staff by application of tests and evaluation.
A well-educated and informed staff can increase the chances of proper engagement in compliance with the AML policies and procedures.
Audit Preparation
After gaining an understanding of what to expect from the auditors during the audit process, prepare copies of all the audit materials necessary to assist the review. Such materials include the following:
- AML Policies and Procedures: Have the most current policies to be able to effectively carry out various aspects of the audit process.
- Risk Assessments: Have the drafts/elements of the recent risk assessment and other important documents and findings.
- Transaction Monitoring Reports: Maintain documentation of SARs and other assets and records of the activities of transaction monitoring.
- Training Records: Retrieve materials on training or evidence of the attempted training and attendance of employees.
Arrange these documents and have them ready; this will demonstrate your readiness and seriousness regarding compliance.
Final Thoughts
By understanding the audit process, going through the policies of the organization, performing internal audits, providing training to the employees, having the right documents, and having a communication strategy, you will improve the completeness of the organization.