The AML/CTF audit and review system and controls periodic performance is important for the role and objective of an internal audit function.

The performance of periodic financial crime audit and reviews by independent department or function such as internal audit, requires appropriate AML/CFT audit planning and monitoring. The audit procedures adopted should be standardized, relevant and sufficiently consistent on entity wide basis enabling it to aggregate money laundering or other crime information in a systemic way to identify any patterns, or trends of weak AML/CFT controls. 

The Independent AML/CTF Audit and Review

Anti-Money Laundering controls review processes should include verification of key information used in compliance reports to Management and the Board. Periodic ML/TF related risk and controls exercise is reviewed to check the identified ML/TF risks by the compliance team and the measures taken to address those risks. The health of controls is checked by the audit team, where controls are tested for selected samples of transactions. 

The audit department performs independent review on the basis of a risk-based sample of material and high-risk activities, to assess the cases or areas where non-compliance may have serious financial and compliance implications resulting in reputation, financial and operational losses. The audit also covers, the areas like awareness of AML/CFT laws and regulations by the department heads, employees and process owners.

All the audit and reviews performed during the period are reviewed by the head of head of audit function. The significant compliance issues and observations are segregated and analyzed in detail with management feedback. This requires discussion with different stakeholders such as departmental heads, head of legal affairs etc. The responses are consolidated and discussed with the departmental heads and the CEO of the entity. 

The material risks and issues are placed before the board audit committee meeting, for its review and feedback. The committee based on the facts presented, issues further instructions and feedback, to ensure that weak internal controls are strengthened and measures are taken to protect the entity from the consequences of ML/TF risks and issues. The management follows the instructions and guidance of the committee and apply the instructions received and report to the committee back in its next meeting through the head of audit function.

Final Thoughts

An AML/CFT independent audit is a thorough examination of your AML/CFT Risk Assessment and AML/CFT Compliance Program by an independent and appropriately qualified individual or the auditor. It includes a review of your AML regime’s operational effectiveness. An independent review is an unbiased evaluation of your AML/CTF program. It ensures that you are following your program and that it adequately addresses your money laundering and terrorism financing risks. complies with your legal obligations.