TBAML Governance Structure and Program ensures effective oversight and implementation of measures to combat money laundering and terrorist financing, safeguarding financial systems and strengthening efforts against illicit financial activities. Institutions are required to develop and implement the Trade-Based Anti-Money Laundering (TBAML) Governance and Compliance program, to prevent the risks of money laundering and terrorist financing.
TBAML Governance means the tone from the top, which is required to be set by the Board of Directors. A robust compliance culture needs to be established and implemented by the Board through the senior management.
A sound governance structure is the foundation of an effective AML/CFT program and will include the board of directors and senior management setting the tone at the top, hiring a qualified chief AML/CFT officer, and properly resourcing the three lines of defense. In an organization such as a bank or a financial institution, the Board of Directors is primarily responsible for setting a strong compliance culture and implementing the compliance program.
The senior management, including the Chief Executive Officer (CEO), is required to ensure that an appropriate, TBAML program is developed and implemented across the institution, to prevent the risks of trade-related money laundering and terrorist financing transactions.
TBAML Governance Structure and Program
The broader components of the TBAML compliance program include:
- Strong compliance culture and tone from the top;
- Development of effective and relevant trade-related compliance policies, and processes;
- The hiring of a dedicated Trade-Based Anti-Money laundering Reporting Officer (TBAMLRO);
- Performance of trade-based money laundering risk assessment, to identify different categories of ML/TF risks with their relevant impacts on the entity’s operations and its reputation;
- Education and training of employees regarding the identification, understanding, and prevention of TBML risks and incidents.
The “tone at the top” is a public commitment at the highest levels of the bank to comply with AML/CFT requirements as part of its core mission and recognition that this is critical to the overall risk management framework of the bank.
To ensure appropriate oversight of the compliance culture, the Board of Directors forms a Board level sub-committee, to periodically monitor the compliance practices and measures taken by the management.
The Board of Directors may delegate the responsibility to the Board Compliance Committee (BCC). The members of BCC periodically conduct compliance meetings, where significant compliance issues, breaches, and new regulatory requirements are reviewed and discussed.
The Board ensures that a strong compliance culture and control environment is maintained. The Board provides oversight and guidance to the Compliance Committee and Senior Management to implement the Compliance program and policies, approved by the Board. The management forms the set of processes, reporting lines, systems, and structures that provide the basis for carrying out regulatory requirements across the organization. The control environment relates to the commitment of management and employees to integrity and ethical values.
TBML Risk Assessment
TBML risk assessment is the process of understanding and analysis of TBML risks that the organization is certainly exposed to.
The TBML risk identification is a process that involves the review of historical trade transactions and other related information, to identify the TBML risk indicators. It involves the analysis of various conditions that highlight the breach of trade controls, and any possible management bias for the actual TBML incident.
The identification process is also a forward-looking activity to assess the possibilities of the reoccurrence of financial crime incidents. To assess the reoccurrence of financial crime in the future in any particular department or function of the company, the investigators analyze the historical as well as current financial crime trends and incidents, to establish the interconnections between them. This connection assessment helps in the prediction of possible future TBML incidents.
To detect incidents of TBML, all the processes and activities are studied to find the control’s weaknesses and possible avenues, which are exploited by the employees or other stakeholders. ML/TF risk detection is an ongoing process that is performed to assess the possibilities of the occurrence of fraud in any particular area of the department.
Through a whistle-blower program, the entity demonstrates its commitment to good corporate governance and the establishment of an anti-financial crime risk management culture that promotes a high degree of ethics and belief in its stated corporate values. The compliance framework and policies highlight the responsibility of the management and employees to report any identified financial crime risk or incident to the senior management of the company or the assigned financial crime management team.
Policies and Procedures
AML/CFT compliance program of different interrelated components that together form the set of rules and principles for the board and management, to ensure that they form relevant policies and processes to prevent the occurrence of financial crime.
The obligation within to prevent financial crime management and all employees, the executive leadership, and the members of governance are required to develop and implement the relevant AML/CFT policies, procedures, and controls. The application of AML/CFT policies, procedures, and controls helps in the prevention of ML/TF risks and ensures that regulatory requirements are complied with by the employees.
AML/CFT policies, procedures, and controls are required to be appropriately defined by the Management and reviewed by the Board of Directors, considering the ML/TF risks to which the organization is exposed. The board defines the framework requires an understanding of the structure, complexity of products and services, customer jurisdictions, and other operational aspects. These are required to be understood because ML/TF risks also relate to these factors.
The Compliance Officer of an organization is required to arrange periodic AML/CFT and KYC training sessions for the relevant employees. The operation of the AML/CFT and KYC processes and procedures in companies mainly depends on the degree of awareness, experience, and knowledge among employees. Adequate awareness, knowledge, and experience on the part of the Company’s employees concerning control of the risks of money laundering and terrorist financing are therefore important preconditions for an effective control framework.
The Compliance Officers provide training courses to all the relevant employees to enable them to perform full and proper customer due diligence, recognize unusual transactions, and ensure effective compliance with sanctions regulations.
Institutions must prioritize the development and implementation of a strong Trade-Based Anti-Money Laundering (TBAML) Governance Structure and Program to effectively combat the risks of money laundering and terrorist financing. This entails setting a strong compliance culture from the top, with the Board of Directors leading the way.
A well-defined governance structure includes hiring a qualified Chief AML/CFT Officer, resourcing the three lines of defense, and implementing robust compliance policies and processes. By conducting thorough risk assessments, providing training to employees, and fostering a culture of accountability, institutions can establish a solid foundation for preventing trade-related financial crimes and ensuring regulatory compliance.