Thornmark Asset Management Inc. May 29, 2012 Slide 1 AML program - - PowerPoint PPT Presentation

Slide 1

Thornmark Asset Management Inc.

May 29, 2012

Slide 2

AML program

aligning training to requirements

Key steps to developing a successful training program are to ensure that you identify and interpret the requirements. This establishes the foundation for policies and procedures that are customized to your business and ultimately training materials to ensure that employees can carry out the requirements of the policies and procedures.

IDENTIFY REQUIREMENTS

PCMLTFA

“The Act”

5 Regulations

Used to carry out the intent of the Act

FINTRAC Guideline s

Plain language guidelines to explain Act & Regulations

FINTRAC Interpretation Notices (FINs)

Technical interpretation of certain provisions

DEVELOP AML P&P and TRAINING INTERPRET REQUIREMENTS

Read Guideline s Consult Act/Regs, if needed Attend Seminars (PMAC)

Hire Lawyers/ Consultant s

Slide 3

AML training

requirements

• Who?

–

If you have more than 1 employee, you need a training program

–

Anyone who has AML touch-points (client-facing, transaction review, senior management, compliance personnel, IT personnel)

• What?

–

Training program must be in writing

• Where/How?

–

Delivered in any manner that best suits your company (face-to- face, web, etc.)

• When?

–

Business-specific, with requirement to train client-facing personnel before they are client-facing

• Why?

–

Because potential fines and jail time are substantial!

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) requires that companies have

• ngoing compliance

training.

Slide 4

Thornmark AML training

content and frequency

• New Employee On-Boarding

–

AML training specific to role

–

PENSIVO training

• Annually

–

PENSIVO training for all employees

• 1st Year
• AML – Securities Dealers, Part 1: Legislative & Regulatory Requirements
• AML – Securities Dealers, Part 2: Compliance & Suspicious Activities
• 2nd Year
• AML – Securities Dealers, Part 3: Refresh and “BDSC’s Case”
• Every 2 years

–

Training at an office meeting

• Using Thornmark’s training document, including question and answer period
• Other

–

As necessary, related to changes in regulations, p&p, or other developments

Thornmark provides training to new employees as they are hired, to all employees annually, with more detailed training provided every 2 years.

Slide 5

Thornmark AML training

audience and evidence of training

• 2 groups

–

Client-Facing (including compliance)

• Training materials + appendices

–

Non-client facing

• Training materials
• Evidence of Training

–

Training at Office Meeting

• Meeting minutes are taken to evidence meeting
• Each employee completes a sign-off sheet confirming that they

understand their PCMLTFA requirements, have attended the office training and have completed the PENSIVO online training

–

PENSIVO

• Participants receive certificate signifying successful completion

More detailed training is provided to those in client- facing and compliance roles and evidence of all training is kept on file.

Slide 6

Thornmark AML training

summary of 5 key training points

1. Definitions

–

Money laundering: any act or attempted act to disguise the source of money or assets derived from criminal activity

–

Terrorist financing: provides funds for terrorist activity

2. ID Clients and Collect All Client Records

–

Ensure that ID documents and client records are complete (follows Thornmark’s regular processes)

3. Suspicious Transactions and Suspicious Attempted Transactions

–

Thornmark is required to report when there are reasonable grounds to suspect that a transaction or attempted transaction is related to money laundering or terrorist activity financing

• Review examples in training materials and understand how they apply to Thornmark’s business

4. Be Aware of Third Parties and Politically Exposed Foreign Person’s (PEFPs)

–

When an account is opened, Thornmark takes reasonable measures to determine whether it is to be used by or on behalf of a third party or if the person is a PEFP

5. Potentially Large Penalties and Prison Time for non-Compliance

–

Failure to report a suspicious transaction could lead to up to 5 years imprisonment, a fine

• f up to $2MM, or both
• Penalties for failure to report do not apply to employees who report suspicious transactions to

superior

Employees are asked to remember these 5 key training points.

Slide 7

Thornmark AML training

examples

• Providing examples related to your business is a great teaching

method, in order for employees to understand context

–

Provide examples for placement, layering and integration

–

Provide situations of when the company would expect a suspicious transaction report to be filed

• Use key words: discomfort, apprehension and mistrust

–

Use pictures to promote understanding:

Employees are provided with examples of things to look for that are specific to Thornmark’s business

Slide 8

Thornmark AML training

a few FINTRAC “dos” and “don’ts”

• Ensure that your AML materials are specific to your business

–

Guidelines

• Don’t just copy and paste the FINTRAC guidelines and consider this

your p&p manual

–

Training

• Don’t take the FINTRAC examples from the guidelines without

considering how they specifically relate to your business

–

Risk Assessment

• FINTRAC states that their risk assessment template is only a starting

point and that companies need to specifically tailor for their circumstances

• Brush up on the details

–

After submitting your required documents to FINTRAC, they will conduct a follow-up phone call in which they will ask very specific questions about the requirements (e.g., “how many days do you have after month-end to file your terrorist report”)

A number of PMAC firms have been through a FINTRAC audit recently and there are some consistent themes.

Slide 9

Thornmark AML training

additional resources

• To further quench your thirst for knowledge, please reference

the following:

–

Canadian Anti-Money Laundering Institute

• Training programs and designations
• http://camli.org/

–

IIROC AML document

• Comprehensive document, which provides requirements for securities

dealers (note that some components are IIROC-specific)

• http://www.amlcompliance.ca/wp-content/uploads/2010/11/IIROC-Anti-

Money-Laundering-Compliance-Guidance-Oct-2010.pdf

Other references…

Slide 10

Thornmark Asset Management Inc.

May 29, 2012

Anti-Money Laundering Compliance

Training Your Employees May 29, 2012

Presented by Alana Dubinski, Stonegate Private Counsel, a division

• f CI Private Counsel LP

How Vulnerable is the PM Industry?

• Exempt distributions attractive to criminal elements due to lesser registration and prospectus

requirements

• Proliferation of hedge funds due to profitability, limited liability in the case of LP’s, lowering

account minimums attract greater number of investors

• Deal in large sums of money – minimum investment of $150K
• Offshore fund investors often use shell companies and trusts or complex structures making

beneficial ownership difficult to identify

• Offshore funds are exempt from certain tax reporting and attract certain classes of investors

that don’t stand out amongst the same client base

• Pooling investor funds and paying out returns in proportional shares, as well as minimum hold

periods makes it difficult to trace source of funds Hedge Funds & Private Pools Offshore Funds & Accounts

Use of Complex Account Structures

Depends on your business model – Products & Services

Source: Oracle Financial Services, Hedge Funds and Anti-Money Laundering White Paper, October 2009

AML Compliance Regime for PM’s

• PM’s AML compliance regime must be tailored to the risks of its

business

• It’s training program should respond to the types of clients it deals

with and the products it distributes

• An effective training program includes,

– educating individuals to identify ‘red flags’ in the course of opening new accounts/accepting deposits – empowers individuals to confidently assess incidents of attempted suspicious transactions and know how/where to report

Using a Risk Based Approach – What does this really mean?

“The systems for classifying and managing risks… must be tailored to the specific features of the entity, such as its structure, size, organization, resources, work force and risk factors. No particular methodology or system is

• imposed. Authorized entities must determine their own risk levels and manage their risks effectively using

appropriate procedures and in keeping with their individual characteristics.”

• AMF guidelines clarifying certain provisions of the General Regulation regarding

the prevention of money laundering and terrorist financing, March 15, 2010

• Factors to help determine the risk of your business

include:

• Jurisdictions firm operates in and its registrations

→ Canada vs. Intl. and solely PM vs. PM/EMD

• The types of clients the firm deals with

→ Institutional vs. Private Client

• The products the firm distributes

→ Hedge/Private Pools vs. Mutual Funds

• Whether the firm handles cash and securities/own banking facilities
• Custody of assets

→ 3rd party custodian vs. own custody

Stonegate’s Risk Assessment

• Using FINTRAC’s Risk Assessment Matrix along with a review of

Stonegate’s business…

Registration Portfolio Manager & EMD Low for managed accounts, moderate for non-managed Jurisdictions All provinces Low Clients Mostly Private Clients Moderate Products/Services Sub-advised mutual funds and segregated model portfolios Low Banking No banking/don’t accept cash/cheques Low Custody Arm’s length trustee Low Method of soliciting business Referral – no marketing Low Client contact Primarily face to face Low

AML First Line of Defense

• The first line of defence in identifying the potential for criminal activity

through the firm is at the time of account opening:

• High risk factors include,

– non face-to-face account opening, i.e. referral from a dealer – complex account types with same settlor and beneficiaries, offshore trusts, multiple holdco’s for same or related beneficial holders – clients who contact you from outside the province/country to open an account

• Your NAAF should be detailed and comprehensive to elicit all the

information you need to identify the client, KYC and regulatory information at the onset

Stonegate’s NAAF

• A detailed, comprehensive NAAF required for each new client relationship

ensures proper identity requirements are met

Areas of Training

• Acceptable methods and

approved documentation for identifying new clients

• 3rd Party payment determination

requirements

• Approved countries/jurisdictions

the firm does business in

• Case studies for identifying

attempted suspicious transactions

• Escalation protocol and how to

report attempted suspicious transactions

Relationship Managers/Advisors Mid-Office Personnel & Admin

• Acceptable identity

documentation by account type and internal controls for deficient accounts

• Monitoring for 3rd party

payments and PEFP accounts

• monitoring for frequent

transactions and exception reporting

• How to file attempted suspicious

transaction reports and escalation protocol

Training Policy Considerations & Best Practices

• AML Training required by all staff within 60 days of hire
• Certificate of successful completion retained in employee file and noted in

AML training report maintained by Compliance

• Review AML training module annually and at the time policies and

procedures are added/updated

• Face to face lunch and learns with real life examples should augment on-

line training for effectiveness

• Provide CE credits for training completion and on-going participation
• Test the effectiveness of AML internal controls, by assessing the number of

deficient account opening packages, random review of client transactions using exception reports, etc. and adjust training accordingly

http://PensivoCompliance.com

PMAC Presentation May 2012

What Is It?

• An online system of mainly 1-hour/1-credit compliance

courses, including AML, Privacy, etc.

• Bilingual (English/French)
• Available from anywhere, 24/7, using any browser
• Allows anyone to take courses and to get required

credits

• Lets “administrators” monitor, manage and audit, when

needed

Our Vision

We believe…

• Well designed learning helps individuals acquire necessary

knowledge and skills

• Quality learning helps create “abled” working environments
• Ultimately, these “abled” working environments drive
• rganisational ROI

It’s about acquiring and applying knowledge, not just “taking courses”.

Who’s Involved?

Content Expertise

• People “from the

field” who focus in on core issues, provide case- studies and up- to-date examples, etc. Technical Expertise

• Instructional

Designers

• Multimedia
• Programmers
• Etc.

Courses Are Selectively Accredited By:

If There is Interest…

1) PMAC.pensivocompliance.com ?

• Could create a PMAC instance of the college

2) Email us so we set you up now

• Get 20% discount if buying 10 credits or more (credits

don’t expire)

• Include the name and email of the “administrator”

The Dashboard

Because CO’s want and need to know.

• Monitor:

– Who’s done what course when, including required training such as AML and Privacy

• Manage:

– Facilitate targeted communication with any and all employees to address compliance requirements – Quickly answer requirements when regulations change

• Audit:

– Solid, verifiable and archived evidence to prove compliance at the touch of a button

Choose the report you want, when you want it. The Dashboard

Add, edit or delete users. The Dashboard

Get a snapshot of who’s done what (by course). Download in Excel format, if needed. The Dashboard

Get the details for each user. The Dashboard

Seeing is Believing

Walkthrough of various screenshots (offline) – Look for:

• Simple, intuitive design
• “Plain language” for everyone to understand
• Combination of various multimedia to reinforce the

learning (and make it engaging!)

• Very visual to keep people’s attention
• Lots of interaction for “active” learning

Engaging, Impactful, Meaningful  Drives Results

Audio-on-demand. Makes it more interesting.

Great graphics to make the learning impactful.

Interactive activities to engage you in the learning.

Learn at your

• wn pace, on

your own time.

Knowledge Checks so you know what you’ve learned.

Questions and answers that apply to you.

Up-to-date Canadian content.

AML 4 – The case of TVC

Real-life case-studies.

Info that is critical to your business.

Recaps to confirm you’ve got it!

A brief quiz to make it all come together.

A certificate you can print or keep in your online folder.

Some of our Courses

• 4 AML courses (1 on regulations; 3 with recaps and

case-studies)

• 2 Privacy courses (1 on regulations and 1 with a recap

and case-studies)

• 2 Broker-Client Conflicts of Interest (with examples)
• Etc.

Course subjects are determined by our clients

If There is Interest…

1) PMAC.pensivocompliance.com ?

• Could create a PMAC instance of the college

2) Email us so we set you up now

• Get 20% discount if buying 10 credits or more (credits

don’t expire)

• Include the name and email of the “administrator”

1604269

http://PensivoCompliance.com

Daniel Larocque daniel.larocque@pensivo.com

Toronto: 416-462-9687 North America: 1-866-596-8372