HOŞGELDİNİZ
11/10/2009
>> WORLD CHECK
The regulatory compliance landscape of the post-9/11 epoch is a far cry from the relatively unregulated context that preceded this major terrorist attack. The following article provides an overview of the major regulatory compliance laws implemented in its aftermath, and explores the KYC/AML and CFT compliance challenges faced by regulated financial service providers worldwide.
Why the need for regulatory compliance?
A succession of corporate scandals and terrorist attacks at the turn of the millennium revealed that criminals were exploiting numerous system loopholes to commit a broad range of financial crimes, including embezzlement, money laundering and fraud. Of much concern was the fact that the proceeds of these crimes were being used shadowy extremist figures to finance terrorism on an unprecedented scale.
Global political stability was being threatened by elusive forces, and the need to curb financial crime and the funding of terrorism became an international priority overnight.
Essentially, financial criminals’ ability to create bank accounts and transact under a false identities had to be curtailed, which called for a level of transactional monitoring and client due diligence unlike any required prior to 9/11.
Regulatory compliance laws: the “Usual Suspects”
The USA PATRIOT Act of 2001 – the legislative benchmark informing all current regulatory compliance legislation in the USA, UK and further afield – included extensive regulatory requirements for banks, accountants, asset management houses, legal practitioners and other financial service providers in terms of client identity verification and Enhanced Due Diligence (EDD) procedures.
Some other well-known pieces of regulatory legislation informed by the USA Patriot Act include the Sarbaines-Oxley Act (SOX Act), the Health Insurance Portability and Accountability Act (HIPAA) and the Bank Secrecy Act (BSA), to name only a few.
Amendments to Know Your Customer (KYC) compliance legislation, and especially those pertaining to AML and ATF considerations, saw pre-2001 guidelines being turned into mandatory obligations. The introduction of the risk-based approach to due diligence, the enforcement of ongoing client and transactional filtering requirements and the increased scrutiny of Politically Exposed Persons (PEPs) were all hallmark features of this new compliance era.
Given impetus by laws such as the USA PATRIOT Act, the resulting class of cross-border regulation made Anti Money Laundering (AML), Know Your Customer (KYC), Advanced Due Diligence and Anti Funding of Terrorism (ATF) compliance mandatory, and extended the regulatory scope to include conveyancers, law firms, hedge fund companies and a host of formerly unregulated financial service providers.
This, for all its positive effects, has had far-reaching operational implications for regulated companies.
The costs associated with meeting compliance mandates using in-house infrastructure is staggering, and generally places a huge administrative burden on key resources within an organisation. These challenges would all contribute to the market demand for a one-stop compliance solution and a centralised risk intelligence database that would consistently outpace emerging regulatory requirements.
Regulatory compliance in the UK
The European Union Second Money Laundering Directive, also known as 2 MLD, was concerned with preventing the proceeds of crime from being laundered, the impending Third Money Laundering Directive focuses on the processing of funds before a crime or act of terror has been committed.
In essence, the broader financial community’s compliance mandate now includes the mitigation of operational risks, while the advent of cost-effective global communication networks and regulatory infrastructure has made enforcement a reality. Other significant pieces of UK regulatory legislation include the Proceeds of Crime Act of 2002 (PoCA), and the Financial Services and Markets Act of 2000.
The JMLSG (Joint Money Laundering Steering Group), comprising several trade associations in the UK financial sector, supports enforcement agencies and publishes best practice guidelines for regulated companies. It also provides information that aids interpretation of UK AML legislation, and compliance to their guidelines has been made mandatory by HM Treasury. In practice, the ongoing expansion of regulatory requirements will see UK authorities implementing an even more rigorous enforcement regime to persecute non-compliant law firms, for example.
Businesses that have never made a disclosure regarding suspect activities are already being targeted, as the parameters of what constitutes money laundering are drawn so wide that not unearthing something suspicious is virtually impossible. As such, failure to notify the Serious Organised Crime Agency (SOCA) of suspicious activities or transactions is treated as a sign of non-compliance.
It is worthwhile noting that much of the UK’s regulatory compliance legislation is informed by European compliance legislation.
European Union (EU) AML legislation
The impending EU Third Money Laundering Directive, which builds on the stipulations of the Second Money Laundering Directive, expands the scope of industries being regulated, and requires companies not only to implement a Client Identification Programme (CIP), but also to keep electronic records of ongoing due diligence and transactional filtering. Adopted in 2005, this directive afforded companies a grace period of two years to fulfil their compliance responsibilities.
As such, regulated companies will need to prioritise the implementation of effective compliance processes as a matter of urgency during 2007.
Regulatory compliance in the USA
THE USA PATRIOT Act (2001) included the Financial Anti-Terrorism Act, a bill aimed at increasing the US Federal Government’s ability to control and monitor financial criminals internationally. Significantly, it made the implementation of an Anti Money Laundering programme compulsory for all financial institutions.
Entities such as the Financial Crimes Enforcement Network (FinCEN), an initiative by the US Department of the Treasury, is one numerous big agencies fighting money laundering in the United States and further afield.
Leveraging the enforcement provisions of the USA PATRIOT Act in implementing US-specific legislation such as the Bank Secrecy Act (also known as the Currency and Foreign Transactions Reporting Act or BSA), FinCEN ensures that financial institutions in the USA assist government agencies in the detection and prevention of fraud and money laundering.
Although the BSA has been effective since 1970, subsequent amendments have significantly increased regulatory agencies’ enforcement powers. Title III of the USA PATRIOT Act – the International Money Laundering Abatement and Anti-Terrorist Financing Active of 2001 – for example, is a case in point. It expanded the BSA’s requirements, and made detailed record-keeping and reporting of underlying transactions and beneficial ownership of accounts mandatory.
Other benchmark regulatory compliance laws included Federal Information Security Management Act of 2002 (FISMA), Gramm-Leach-Bliley Act (GLBA) and Health Insurance Portability and Accountability Act (HIPAA ).
AML and CTF Compliance: Implications for banks and financial institutions
The above-mentioned laws have formed the foundation for the regulation of banks, asset management houses, lending companies and related financial services providers. Non-compliant institutions face severe financial penalties. Yet as the Riggs case had shown, the dangers of non-compliance doesn’t stop at financial penalties: the reputation damage resulting from the financial scandal this US bank had been embroiled in sent its share price plummeting, and effectively caused the demise of one of America’s top banks.
KYC Compliance: Implications for law firms
US attorney Lynn Stewart’s controversial legal representation of Sheik Abdel-Rahman saw her convicted on charges of providing material support for a terrorist conspiracy, and for defrauding the US government during 2005.
“Knowing Your Customer” through an effective Customer Identification Programme (CIP) has become vital, not only for keeping your law firm’s reputation intact, but also to avoid legal prosecution. Effective Enhanced Due Diligence (EDD) and ongoing transactional filtering has become as critical for law firms and private legal practitioners as it is for banks and other financial institutions.
It is also important to note that financial institutions face compliance risks in dealing with law firms, as legal practitioners may be acting on behalf of heightened-risk clients.
A comprehensive solution for regulatory compliance
World-Check, the world’s leading provider of highly structured risk intelligence, offers banks, asset management companies, law firms, accounting houses and related financial service providers a one-stop solution for meeting their regulatory compliance requirements.
World-Check comprises the Data-File (flat file), as well as an Online Service and Passport-Check facility gives companies the ability to do on-the-spot checks, or filter entire client bases automatically.
Featuring a database of hundreds of thousands of heightened-risk persons and entities across risk variables ranging from money laundering and fraud to organised international terrorism funding, it is the compliance solution of choice for 47 of the worlds 50 largest banks. Significantly, 18 of Europe’s top 20 banks and 9 of the top 10 banks in the US are ongoing World-Check clients.
Read more about World-Check, and find out how this risk mitigation solution can help your institution achieve compliance, or learn more about regulatory compliance legislation
11/10/2009
>> Custom Stack Analysis
Custom Stack Analysis, LLC., was originally established in Alliance, Ohio, in 1965 by Mr. Ernest Kolm. In the year 2000, the company was acquired by Mr. James K. Gray, who has over 18 years experience in the field of air emissions testing. In the year 2005 Custom Stack Analysis, LLC. acquired the source testing assets of Envisage Environmental, Inc. Custom Stack Analysis, LLC. has capabilities for performing Stack Testing, Industrial Hygiene, Analytical Services, Burner Combustion Efficiency, Radon Testing and Indoor Air Quality. The company has performed work not only for small companies, but also many fortune 500 companies. A professional staff can ensure that any of your environmental needs are met with quality and competitive pricing.
Custom Stack Analysis, LLC., has been providing air emissions testing for the past 38 years. In this time, they have performed testing for many prominent clients, such as Stericycle, Inc., Goodyear Tire & Rubber Co., and WCI Steel, along with many other prominent companies. The company has extensive knowledge in testing for medical waste incinerators, printing operations, steel foundries, asphalt facilities, power plants, petroleum refineries, chemical plants, brick manufacturers, lumber processing, hazardous waste incinerators, rubber manufacturing, roofing production, plastic manufacturers, and many other types of operations. The company has also been providing its services to engineering companies, government agencies, and control system designers. The company has experience providing services internationally including Canada, Puerto Rico, Jamaica, Dominican Republic, Caribbean Islands and South America. If you have an international project that requires our services be sure to give us a call. In 2009 Custom Stack Analysis, LLC. joined a service alliance with Zaff International/Hi-Tech Ltd. for providing services in Saudi Arabia and the Gulf Coast countries.
Custom Stack Analysis, LLC., has an excellent performance reputation in working with many prominent Clients in Ohio and throughout the United States. The company is noted for its ability to deliver quality services in accordance with project schedules, and to provide responsive assistance to Clients in emergency situations.
Custom Stack Analysis, LLC., has a company policy of providing high quality services to clients. The company also has a strong commitment for safety on the job for its work force, which includes USEPA's safety, health, and environmental management training program for field activities for all employees.
Custom Stack Analysis, LLC., is an active member in the Air & Waste Management Association, Source Evaluation Society, Ohio Chamber of Commerce, and Carolina Air Pollution Control Association
11/10/2009
>> KYC
Know Your Customer (KYC) compliance regulation has proved to be one of the biggest operational challenges banks, accountants, lawyers and similar financial service providers worldwide have had to overcome.World-Check, the industry standard KYC compliance solution, provides an overview of KYC compliance and its origins, and outlines the compliance mandate as applicable to banks, accounting firms, lawyers and other regulated financial service providers – not just in the UK, Europe and the USA, but all around the world. Relied upon by more than 3,000 institutions worldwide, this KYC database solution provides effective legal and reputational risk reduction.Why “Know Your Customer?”The 9/11 terrorist attacks on the World Trade Centre revealed that there were sinister forces at work around the world, and that terrorists activities were being funded with laundered money, the proceeds of illicit activities such as narcotics and human trafficking, fraud and organised crime. Overnight, the combating of terrorist financing became a priority on the international agenda.For the financial services provider of the 21st century, “knowing your customers” was no longer a suggested course of action. Based on the requirements of legislative landmarks such as the USA PATRIOT Act 2002, modern Know Your Customer (KYC) compliance mandates were created to simultaneously combat money laundering and the funding of terrorist activities.What is Know Your Customer (KYC)?Know Your Customer, or KYC, refers to the regulatory compliance mandate imposed on financial service providers to implement a Customer Identification Programme and perform due diligence checks before doing business with a person or entity.KYC fulfils a risk mitigation function, and one its key requirements is checking that a prospective customer is not listed on any government lists for wanted money launders, known fraudsters or terrorists.If preliminary KYC checks reveal that the person is a Politically Exposed Person (PEP), for example, Advanced Due Diligence must be done in order to ensure that the person’s source of wealth is transparent, and that he or she does not pose a reputational or financial risk in terms of their finances, public positions or associations. Beyond customer identification checks, the ongoing monitoring of transfers and financial transactions against a range of risk variables forms an integral part of the KYC compliance mandate.But to understand the importance of KYC compliance for financial service providers better, its origins need to be examined.Origins of Know Your Customer (KYC) complianceThe arrival of the new millennium was marred by a spate of terrorist attacks and corporate scandals that unmasked the darker features of globalisation. These events highlighted the role of money laundering in cross-border crime and terrorism, and underlined the need to clamp down on the exploitation of financial systems worldwide.Know Your Customer (KYC) legislation was principally not absent prior to 9/11. Regulated financial service providers for a long time have been required to conduct due diligence and customer identification checks in order to mitigate their own operation risks, and to ensure a consistent and acceptable level of service.In essence, the USA PATRIOT Act was not so much a radical departure from prior legislation as it was a firmer and more extensive articulation of existing laws. The Act would lead to the more rigorous regulation of a greater range of financial services providers, and expanded the authority of American law enforcement agencies in the fighting of terrorism, both in the USA and abroad.In October 2001, President George W. Bush signed off the USA PATRIOT Act, effectively providing federal regulators with a new range of tools and powers for fighting terror financing and money laundering. During July 2002, the US Treasury proceeded to introduce Section 326 of the PATRIOT Act, a clause that removed some key burdens for regulators and added significant enforcement muscle to the Act.What 9/11 changed, in essence, was the extent to which existing legislation was being implemented. Using the provisions of the earlier anti-terrorism USA Act as a foundation, it included the Financial Anti-Terrorism Act, which allowed for federal jurisdiction over foreign money launders and money laundered through foreign banks. Significantly, it is this anti-terror law that would make the creation of an Anti Money Laundering (AML) programme compulsory for all financial institutions and service providers.Section 326 of the USA PATRIOT Act dealt specifically with the identification of new customers (“CIP regulation”), and made extensive provisions in terms of KYC and the methods employed to verify client identities.In accordance with this piece of updated KYC legislation, federal regulators would hold financial institutions accountable for the effectiveness of their initial customer identification and ongoing KYC screening. Institutions are required to keep detailed records of the steps that were taken to verify prospective clients’ identities.Although current KYC legislation does not yet demand the exclusion of specific types of foreign-issued identification, it recommends the usage of machine-verifiable identity documents. The ability to notify financial institutions if concerns regarding specific types of identification were to arise, combined with a risk-based approach to KYC, proved to provide a robust mechanism for addressing security concerns.Effectively, the risk-based approach to customer due diligence grants regulated institutions a certain degree of flexibility to determine the forms of identification they will accept, and under which conditions.KYC compliance: Implications for banks, lawyers and accounting firmsThe KYC compliance mandate, for all its positive outcomes, has burdened companies and organisations with a substantial administrative obligation. Additionally, KYC compliance increasingly entails the creation of auditable proof of due diligence activities, in addition to the need for customer identification.
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