12. A Trainer's Perspective: Key Topics to Cover (2)

Last week we looked at some of the key topics we need to teach in order for the class to be equipped in their understanding of AML/CFT. We covered a few sub topics under the larger umbrella of Customer Due Diligence (CDD), as the first part of a bank's main responsibilities when it comes to AML/CFT.

In general, there are 3 basic areas that a bank needs to be adept in:

a. Performing quality Customer Due Diligence (CDD) to know sufficient about their customers in order to assess the risks in having said customers and then making informed decisions to accept the customer;

b. Performing Transaction Monitoring in order to compare what the bank knows about the customer (via CDD) against what the customer actually does in its banking activities;

c. Raising Suspicious Transaction reports to the authorities when there are discrepancies between what the bank knows about the customer (a) and what the customer actually does (b) that cannot be reasonably explained, which in turn causes the bank to be suspicious of potential Money Laundering / Terrorism Financing activity.

We covered part (a) last week. Today we will look at how we can teach various topics under Part (b and c) above, Transaction Monitoring and Suspicious Transaction Reporting.

Transaction Monitoring

This is usually done in 2 ways: via automated IT systems or manually by bank staff. While traditionally, manual monitoring is possible, with the volume of transactions industry wide becoming higher and higher, it is not cost effective nor effective to use staff for this exercise. More and more banks are investing in 3rd party systems providers to perform this operation. All the banks now need to do is set the relevant parameters based on their risk appetites and then allow the system to perform the monitoring. The system will then churn out alerts whenever transactions breach certain thresholds or fulfil certain criteria/patterns set into the systems. You may try: Depending on the bank you are currently in, you may take this opportunity to share the system being used and explain generally how it works, how it detects potentially suspicious transactions, how it subsequently generates alerts, and what the staff of the bank needs to do when these alerts are generated. This is a good time to bring up Red Flags of AML/CFT.

Red Flags of AML/CFT

Red flags are indicators that arise due to customer behaviour (identifiable by staff observation) or due to transaction volumes/patterns that do not match with the customer profile (identifiable via staff observation and/or system analysis). BNM's guidelines on AML/CFT to Banks and Deposit Taking Institutions has an Appendix that lists down quite a number of different red flags according to the type of product a bank offers. You may try: Gather the class into groups of 4 or 5 and for each group, give them a standard / non standard bank product. Then ask them to come up with 4 or 5 behaviours / transaction patterns that a customer with that product can engage in that can be potential red flags. Then get each group to appoint a spokes person to share their ideas. This is a good way to get the class to process and think of ways potential money launderers can be detected.

Suspicious Transaction Reporting (STR)

This is a natural continuation of Transaction Monitoring. Alerts generated by system or highlighted by staff should be investigated and then a decision has to be made by the bank, usually an appointed Compliance Officer, on whether the case is deemed suspicious or not. If it is not suspicious, the Compliance Officer has to document the rationale/justification why the case is not suspicious. If it is suspicious, i.e. a Red Flag/s with no reasonable explanation, the bank (via its Compliance Officer) is obligated to raise a Suspicious Transaction Report (STR) to the relevant authorities. You may try: Break the class into groups, give each group a scenario where there is a profile of a customer and some types of behaviour and transactions. Get the groups to analyse and write down a short report to decide (1) if the case is suspicious or not, (2) if not, why not, and (3) if yes, draft a short Suspicious Transaction Report to be forwarded to the bank's Compliance Officer. For (2), there must be justification why the case is considered Not Suspicious; and For (3), there must be justification and sufficient customer and transaction information to conclude why the case is deemed suspicious.

In conclusion for this and last week's post, do note that there is no way to cover all key areas on AML/CFT in one class. The idea is to design a class that is engaging and allows the participants to learn not just the hows, but the whats and whys as well. Then keep them coming back for more. The AML/CFT area is ever so dynamic. If possible, you will need to design and hold periodic refreshers, especially for those staff that are in the Compliance and Risk Management areas, for they are the key people whom will be trained to go to the frontline to train those staff dealing with the customers and processing their transactions.

Stay tuned for next week's post, have something for you...