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The Board of Directors – Ensuring Effective AML/CFT Training

The 2020 JFSC themed examination report “The Role of the Money Laundering Reporting Officer” has now been published. The Report highlights two key issues for the boards of directors of regulated entities:-

  • AML/CFT training and awareness of Registered Persons’ employees is often insufficient; and
  • Continued poor understanding of the responsibilities around the filing of suspicious activity reports.

Ten adverse findings relating to training and awareness were found across the 17 sample Relevant Persons reviewed. The Relevant Persons concerned undertake Trust Company, Funds Services, Investment and Deposit-Taking Business.

With the Civil Penalties Regime encompassing Registered and Principal Persons and negligence, it is vital that Registered Persons and their boards of directors have close regard to the Report and respond to the lessons arising. Increasingly, we are seeing the JFSC being more stringent in what it expects from Registered, Principal and Key Persons in order to demonstrate compliance. This is particularly important given the JFSC’s declared (February 2020) four year focus on fighting financial crime.

Assessment by the Board

Crucially, the board of directors must assess and be able to demonstrate the effectiveness of its AML/CFT training provided.

Simply training staff to know what money laundering is and the offences that can be committed is not considered by the JFSC to be enough. The JFSC’s Report makes it plain that adequate AML/CFT training must be provided. This means that the training is tailored and relevant to:-

  • the nature of business the Registered Person undertakes;
  • the Jersey legal and regulatory regimes; and
  • the employees to whom it is delivered.

Employees must understand the role they play, and their contribution to the fight against money laundering and terrorist financing. The training must cover key aspects of the legislation and regulation, and what each as an employee must do and when.

Boards of directors should be most wary of purchasing ‘off the shelf’ AML/CFT training packages, especially if not tailored to Jersey. The JFSC found the training in some instances did not adequately reflect Jersey’s legal and regulatory regimes.

Common Failings

Given the maturity of the AML/CFT legal and regulatory regimes in Jersey and the Civil Penalties Regime being firmly in place, the JFSC Report contains alarming, significant findings that employees in the regulated sectors, when interviewed, did not know:-

  • Who the MLRO was
  • What a SAR is
  • In what circumstances a SAR should be raised
  • The timescale for filing of a SAR
  • Whether filing a SAR fulfilled their responsibilities
  • The importance of receiving an acknowledgement from the MLRO and advice on next steps
  • The ‘tipping off’ statutory provisions
  • The AML/CFT risks faced by the business.

Questions for the Board

All Registered Persons’ boards of directors must be confident as to the adequacy of the AML/CFT training and its effectiveness. This requires boards to monitor the training being provided and ensure that it matches the Registered Person’s business undertaken. So boards should be asking themselves:-

  • How comprehensive was the last report the Board received on its AML/CFT training?
  • Was the training tailored to Jersey’s legal and regulatory regimes, our business and the level of employees?
  • When and how did our board ensure testing the effectiveness of the training?
  • When were employees last tested on their awareness of risks, of the relevant policies and procedures and on their legal and regulatory obligations?
  • Is our board confident that, from the training provided, all employees at all levels are able to recognise the need to file a SAR and, importantly, how to do so?
  • Crucially, how can our board adequately evidence the above?

Effective Training and Monitoring

In our experience, employees tend not to ask enough questions during group training sessions. The majority of attendees often sit silent. How can the board be sure the training has been understood?

There are various ways of assessing effectiveness. The JFSC highlights one good practice example: sending a factual scenario to all staff, requiring responses on a draft internal suspicious activity report. Feedback was then given in groups and individually. Another could be a case study or questionnaire sent to all staff, requiring answers to the issues raised.

About Lacey Advocates

We are trust, litigation and regulatory experts. With decades of legal and regulatory experience and having held Principal Person positions, we advise Registered, Principal and Key Persons on the successful running of their businesses. This includes advising on the effectiveness of policies and procedures, including AML/CFT.

We design and provide bespoke policies, procedures and training to TCB and FSB boards of directors, MLROs and MLCOs. This ensures all legal and regulatory duties are fully understood and any difficulties encountered are successfully resolved.

Please do not hesitate to in contacting us if we can be of assistance. If you would like to discuss anything arising from this article further, please get in touch with:-
Beverley Lacey: T (00 44 1534) 888460 (beverley.lacey@laceyadvocates.com) or
Michelle Cabot: T (00 44 1534) 888463 (michelle.cabot@laceyadvocates.com).