AHMAD WASEEM KHAN HEAD OF INTERNAL AUDIT & COMPLIANCE LUCKY - - PowerPoint PPT Presentation

AHMAD WASEEM KHAN HEAD OF INTERNAL AUDIT & COMPLIANCE LUCKY CEMENT LTD

IS NON FINANCIAL SECTOR EXPOSED TO FINANCIAL CRIMES ?

“Where money is given to or received from a different entity than the services/goods were received from or provided to in order to transfer funds without utilizing traditional banking channels” The process of disguising the proceeds

• f crime and moving value through the

use of trade transactions in an attempt to legitimize their illicit origin

• Companies/Entities knowingly i.e with “Willful Blindness” handle “dirty money” generated by

a wide variety of illicit activities.

• Companies that directly engage in criminal activity that generates illegal funds.
• Companies that use funds for some illicit purposes.
• Companies using shell companies to handle dirty money.
• Companies using “Funnel Accounts” to handle dirty money.

Risk of Investigations

• If there is no frame work in place to handle the

“Financial Crime Risks” then there is a greater risk that the entity is exposed to an increased risk of investigations.

• The frequency of such investigations will also

increase

• Entity will be exposed to a wide variety of law

enforcement agencies local/federal /international and this can become cumbersome Increased Administrative Burden in Maintaining Banking Relationships

• Banks and financial institutions will be

generating number of queries for the fund movement.

• Businesses are now required to share greater

details of their customers/dealers

• Executing transactions with banking partners

will become arduous and time consuming

• Delays in executing transactions can have

devastating implications on the business Risk of Being “De-Risked”

• Termination of banking relationship raises a

host of problems for any corporate entity

• Entity’s ability to generate and collect funds is

greatly affected.

• Entity’s access to capital, letter of credit, loans,

corporate credit cards etc becomes a serious threats to operations.

• The cost of doing business will go substantially

high Risk of Fines & Penalties

• If found guilty of willful blindness entity can

face huge fines, penalties and may face criminal prosecution.

• The size of such penalties /fines may affect the

company’s cash flow and in some cases may wipe-off sizable portion of entities equity. Risk of Loss of Reputation

• Organizations face serious reputational risk if

their name pops up in an AML fraud.

• Loss of reputation leads to erosion of share

value

• Administratively it becomes difficult to deal

with financial institutions.

• Due to reputational risk arises the risk of

erosion of human capital Increased Burden of Fighting a Legal Battle

• An entity will be spending huge sums in terms
• f legal costs to avoid fines and penalties.
• The administrative burden of handling legal

queries and supplying correct/accurate information may add up to

Enhance your own AML Compliance Build In –House Compliance Function For Scrutiny of All Financial Transaction Invest in terms of Financial Resources & Manpower to Minimize The Risk Suspicious Activity Reporting (SAR) Framework Develop “Red Flags” to highlight any high risk transaction Use technology “Big Data” to analyze high volume data to raise any suspicious activity Revisit The Distribution & Collection Channels Cutting Ties With Customers/Dealers With Dubious Background Deny third party payments in your accounts & From Your Accounts Define “Know Your Customer” (KYC) policy at all distribution levels Do the deep digging by KYCC- Know your Customer’s Customer Define Risk policy for Jurisdictions known for smuggling or lawlessness

A PRACTICAL APPROACH COLLECTION & PAYMENTS

• Not accepting third party cheques/pay-
• rders from distributor/suppliers
• Denying request from counterparties for

unusually complex deal structures or structures with apparent business purpose

• Denying request from counterparties that

funds be delivered to apparently unconnected accounts

• Payment of an invoice with multiple

instruments of third and unknown parties

• Delisting of a customer, dealer, vendor due to

rumors/news of criminal or regulatory violations PREEMPTIVE CONTROLS

• Enhance compliance where violations may

trigger bank scrutiny.

• Meeting all regulatory compliances for
• ffshore payments & maintaining adequate

documentation for future investigations.

• Restricted approach in jurisdictions known

known for smuggling or lawlessness

• Organization

need to develop a well documented “Response Policy” defining the protocols to follow in case a query is raised or an investigation is initiated.

• Organizations

should be prepared to deal with the questions from the financial institution about potential compliance issues.

• A senior official should be defined as point of contact for

dealing with questions from banks that may implicate legal compliances

• Procedures should be in place for quickly elevating the

inquiry to the right legal /compliance authority for an appropriate response.

• All evidence submitted against any query should be

evaluated from all legal perspectives so as to ensure that the same will be used by law enforcing agencies in case of any complications. Falsification of records or submission of fabricated documents may at a later stage of investigation may jeopardies company’s image. Therefore the evidence should be submitted after review of the legal council

“Today’s heightened AML scrutiny

• f financial institutions has major

potential consequences for their customers as well. Non Financial Institutions can protect them selves by enhancing their own compliance – especially in areas like AML which might raise red flags with banks and appropriately handle queries and concerns that their financial institutions may raise.”

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THANK YOU