What is an Independent Review of Your AML/CTF (anti-money laundering/counter-terrorism financing) Program?

An independent review is an objective evaluation of your AML/CTF (anti-money laundering/counter-terrorism financing) program by an external auditor. The purpose of the review is to assess the effectiveness of your Program in meeting your reporting obligations under the AML/CTF laws and associated regulations.

Why You Need an Independent Review

An independent review provides an unbiased assessment of your Program's effectiveness, identifying areas for improvement and helping to reduce the risk of financial crime. It also demonstrates to regulators and stakeholders that you take your AML/CTF obligations seriously and are committed to combating money laundering, terrorism financing and other financial crime.

How Often Should You Do an Independent Audit?

The frequency of conducting an independent review of your AML/CTF program will depend on several factors, such as the size, nature, and complexity of your business, the risk assessment of your business, and regulatory requirements in your jurisdiction.

In some countries like New Zealand and Canada, the regulatory framework prescribes that reporting entities should conduct an independent review and assessment of their AML/CTF program every two years. This means that you are required by law to conduct an independent audit of your Program every two years in these countries. However, in other countries, such as Australia and the USA, the laws and regulations do not prescribe a certain frequency on how often the independent review should be conducted. Instead, it is up to the reporting entity to determine how often they should conduct an independent review based on the risk assessment of their business.

A good rule of thumb is reporting entities to perform an independent review every 2-3 years, even if the law and regulations do not prescribe a specific frequency. This will help to ensure that your Program remains effective in mitigating the risks of financial crime and compliant with changing regulations.

It is important to note that the frequency of conducting an independent review may also depend on other factors, such as changes in your business operations or regulatory landscape, significant incidents related to anti-money laundering/counter-terrorism financing, and feedback from your internal compliance team or external auditors.

Choosing the Right Independent Auditor

Selecting the right independent auditor is critical to the success of your review. Look for auditors with experience in your industry, a thorough understanding of AML/CTF obligations, and a track record of delivering high-quality audits.

Don't Fear the Audit: Embrace It!

Many reporting entities view audits as a necessary evil. However, an independent review is an opportunity to improve your Program and demonstrate your commitment to compliance. By embracing the audit, you can gain valuable insights into your Program's effectiveness and identify areas for improvement.

Kick-Off Meeting: Getting to Know Your Auditor

The independent review process typically begins with a kick-off meeting, where you will meet with the auditor to discuss the subject and scope of the review, the timeline, and any specific requirements. This is also an opportunity for you to get to know your auditor and establish a positive working relationship.

Onsite vs Desk Review

Depending on the scope of the review, the auditor may conduct the review onsite or remotely through a desk review. An onsite review allows the auditor to observe your Program in action, while a desk review relies on documentation and information provided by the reporting entity.

The Review Process: What Will Be Reviewed?

During the independent review, the auditor will assess the effectiveness of your Program in meeting your reporting obligations under the AML/CTF laws and associated regulations. This review will be conducted in a comprehensive manner and will involve the assessment of several key components of your Program.

Review of your risk assessment

One of the key areas that will be reviewed is your risk assessment process. The auditor will examine the effectiveness of your risk assessment process in identifying and assessing the risks of money laundering and terrorism financing that your business faces. They will evaluate the adequacy of your risk assessment methodology, including the risk factors used, the frequency of risk assessments, and the quality of your risk assessment documentation.

Review of your CDD records (including KYC)

The auditor will also review your customer due diligence (CDD) process to ensure that you are correctly identifying and verifying the identity of your customers. They will evaluate the adequacy of your CDD procedures, including the methods used for identity verification, the sources of information used, and the procedures for ongoing monitoring of your customers.

Review of your ongoing monitoring and transaction monitoring processes

Another area of focus will be your ongoing monitoring and transaction monitoring processes. The auditor will examine your procedures for ongoing monitoring of your customers and transactions, including the use of automated systems and alerts. They will evaluate the effectiveness of your procedures for detecting and reporting suspicious activities, including the quality of your suspicious matter reports.

Review of your policies, procedures, and training programs

Your policies, procedures, and training programs will also be reviewed to ensure that they are up-to-date and effective. The auditor will assess the adequacy of your policies and procedures in meeting the requirements of the laws and associated regulations. They will also evaluate the quality of your training programs, including the frequency and content of your training and the effectiveness of your training delivery methods.

Sample review of your transactions

In addition, the auditor may conduct a sample review of your transactions to ensure that your Program is working effectively in practice. They may also examine your internal controls, including your transaction reports (e.g. SMRs, TTRs, IFTIs) and reporting procedures, to ensure that they are adequate and effective.

Review of the effectiveness of your Program

Finally, the auditor will assess the effectiveness of your Program in meeting your reporting obligations. They will evaluate the accuracy and completeness of your reporting, including the timeliness of your reports and the quality of the information provided.

The Review Findings, the Review Report, and Exit Meeting

At the conclusion of the review, the auditor will provide you with their findings and recommendations in a review report. You will then have an exit meeting to discuss the report and any identified issues. The report will provide you with a roadmap for addressing any gaps in your AML/CTF program.

Addressing Identified Issues: Closing the Gaps

Once you have received the review report, you should develop a plan for addressing any identified issues. This may involve updating policies and procedures, providing additional training, or implementing new controls. It is important to address these issues promptly and thoroughly to improve your Program's effectiveness and reduce the risk of financial crime.

Post-Review Support and Maintenance

After addressing the identified issues, it is important to maintain ongoing support for your AML/CTF program. This includes regularly reviewing and updating your Program, providing ongoing training to staff, and staying up-to-date with changes to AML/CTF regulations.

How Can bronID Help?

If you are looking for assistance with your independent review, bronID can help. Our team of experienced auditors has performed numerous independent reviews for businesses and organisations of different sizes across a range of industries.

bronID's approach

Our methodology for conducting an independent review includes a comprehensive assessment of your technical compliance, level of execution, and level of effectiveness of your AML/CTF program. We take a risk-based approach to the review process, which means that we focus on the areas of your Program that pose the highest risk to your organisation.

Report and action plan

At the end of the review, we will issue a detailed and comprehensive review report and action plan. The report will provide you with an objective evaluation of your Program's effectiveness in meeting your AML/CTF obligations and will identify any areas for improvement. The action plan will outline the steps you need to take to address any identified deficiencies in your Program.

Get a verifiable digital certificate

In addition, you will receive a verifiable digital certificate that confirms that the review has been performed by an independent auditor in accordance with best practices and regulatory requirements. The certificate will include an executive summary that you can share with regulators and third parties upon request, providing assurance that your Program has been independently reviewed and assessed.