Anti-Money Laundering (AML) Internal Audits ensure that your firm is complying with regulations and has effective procedures in place to prevent money laundering (ML) and terrorist financing (TF).
Whilst preparing for an AML Audit may be daunting, the right approach and preparation can help you navigate the process smoothly. Here are Complyport’s top tips to help you prepare for your AML Internal Audit.
Conduct a thorough BWRA
A Business-Wide Risk Assessment (BWRA) is going to be at the root of your AML framework and Internal Audit. It involves identifying and assessing the risks your business faces in relation to ML/TF. A thorough BWRA should cover all aspects of your business, including customer types, products and services, delivery channels, and geographical areas of operation. By understanding these risks, and allocating a risk scoring, you can implement appropriate controls to mitigate your financial crime risks and increase your chances of a smooth internal audit.
Our top tip: Regularly update your BWRA to reflect changes in your business operations as well as the external market and regulatory environment. This ensures that your risk assessment remains relevant and effective.
Evidence that your Customer Due Diligence (CDD) has been carried out
CDD, along with transaction monitoring, represents a crucial part of your daily AML practices and obligations. Whilst having AML policies and CDD procedures in place is essential, being able to demonstrate how you verify the identity of your customers and assess their risk profile day-to-day, including the systems you use, will make the difference during an internal audit. Policies are important, but during an Internal Audit, the proof is in the documentation of your CDD system checks.
Our top tip: If you outsource CDD to a third-party provider, ensure that you maintain immediate access to the system, your CDD records and ongoing monitoring activities. These records should be easily accessible for both your business and your auditor.
Make policies accessible to staff
Having comprehensive and regulatory compliant AML policies and procedures is indispensable, but they are only effective if your staff understands and follows them. Often, these policies are buried in lengthy documents, making it difficult for staff to know what is expected of them.
Our top tip: Create a key facts document that summarises the most important aspects of your AML policies and procedures. This document should be concise, easy to understand and readily accessible to all staff members. Regular training sessions can also help reinforce these policies.
Be aware of the Regulators’ strategy
Regulators are becoming increasingly proactive in their efforts to enforce AML. The Financial Conduct Authority’s (FCA) Strategy for 2022-2025 includes a stronger focus on financial crime inspections to “disrupt and pursue firms and individuals”. The Regulator may launch a probe into your business to ensure everything is in order, and if they do, you do not want to be caught by surprise.
Our top tip: Stay informed with regulatory updates and be prepared for inspections. Engage with your Regulator(s) proactively and demonstrate your commitment to their standards. This can help build a positive relationship and reduce the likelihood of enforcement actions.
Welcome Internal AML Audits
Internal Audits are a fundamental aspect of your AML compliance framework, and they should be occurring annually. Auditors will review your policies, procedures and records to ensure they meet regulatory requirements. They will conduct interviews, check filings, and assess the effectiveness of your controls.
Our top tip: Assign senior managers to lead the audit process and act as points of contact for auditors. Ensure that all relevant staff members are available to provide information and answer questions. Effective communication with auditors will make for a smooth audit process. Create an environment where staff feel comfortable responding to questions with clear and accurate information.
Avoid surprises
The last thing you want during an Internal AML Audit is for your auditors to find something out of place. This can lead to regulatory reporting, enforcement actions, fines or damage to your reputation.
Our top tip: Regularly review and update your AML policies and procedures to ensure they remain relevant and effective. Conduct periodic staff training to identify and address any potential issues before an actual audit. This proactive approach can help you avoid surprises and demonstrate your commitment to an AML compliance framework akin to regulatory standards.
How Complyport Can Help
Preparation and proactive engagement are key to a smooth AML Audit process. Utilise our team of experts’ comprehensive understanding of regulatory frameworks and practical insights into the financial services industry to conduct your Internal AML Audit.
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