AML/CFT Sanctions Regime,… How ready are Financial Institutions?

The fight against money laundering and/or terrorist financing seems to be championed in Ghana by only Banks with other financial institutions not paying much attention to it. In order to be compliant to the regulations, directives and laws on money laundering, these banks invest considerable amount of their resources towards the fight against money laundering and terrorist financing in order not to be vulnerable to schemes of the criminals.


The cost of non-compliance to Anti Money Laundering and Combating Terrorist Financing regulations and directives is so high that it can cause the bankruptcy of financial institutions. Financial regulators all over the world are seriously ensuring that financial institutions and other companies implement tight anti-money laundering techniques and principles to reduce the risk of money laundering and terrorist financing. The regulators do this by implementing a sanctions regime to punish non compliance of anti money laundering and combating terrorist financing principles and program. This is evident in the number of fines and sanctions imposed on financial institutions worldwide.


Mention can be made of Capital One, which was fined $100 million by the States’ Office of the Comptroller of the Currency (OCC) for anti money laundering breaches, including failure to file suspicious transactions. Also the Financial and Capital Market Commission (FCMC) of Latvia fined JSC ‘LPB’ Bank €2.2 million for breaching anti money laundering and counter terrorist financing (AML/CFT) rules, after it uncovered a number of significant deficiencies. Issues that were of concern included a lack of clarity around beneficial ownership, poor customer due diligence issues and transaction monitoring. ING Bank was asked to pay a fine of €775 million by the Dutch Public Prosecution Service for compliance failures that allowed companies to allegedly launder hundreds of millions of euros and pay bribes over six years. South Africa’s Prudential Authority (PA) in the month of November 2018 fined HSBC R15 million (£844,927) after it identified weaknesses in the bank’s anti money laundering and counter terror funding (AML/CFT) systems.


The Bank of Ghana (BoG) in collaboration with the Financial Intelligence Centre (FIC) recently introduced the Revised AML/CFT guidelines for Banks and other Financial Institutions to strengthen the fight against money laundering and terrorist financing. To make financial institutions responsible to this fight, BoG has toughened its stance by introducing the Administrative Sanctions/ penalties with an effective date of 1 August 2018. The penalty/ sanctions ranges from 2,000 to 10,000 penalty units with each penalty unit valued at GH¢12.


The question is “Are Banks and Non-Banks Financial Institutions ready for this new sanctions regime?” This article aims to throw more light on some of the penalties and how they can be avoided.


Section 41 (1)(b) and (2) of the Anti Money Laundering Act, 2018 (Act 749) as amended states that every bank and non bank financial institution should appoint an Anti Money Laundering Reporting Officer (AMLRO) at management level to handle all compliance issues of the financial institution; failure of which will attract a minimum penalty of 4,000 penalty points for Banks and 2,000 penalty points for the Specialized Deposit-taking Institution.


The Bank of Ghana will sanction any bank and non bank financial institution which fails to develop and implement Internal Risk Assessment Framework with minimum penalty units of 4000 and 2000 respectively. This sanction is backed by section 40(2)(a)(viii) of Act 749, as amended.


Failure to give access to information to BoG and Financial Intelligence Center (FIC) or any competent authority, which attracts minimum of 2000 penalty units, is one of the administrative sanctions introduced by the BoG. Section 28 and 29 of Act 749, as amended requires banks and non bank financial institutions to comply.


Minimum of 2000 penalty units of charge to any bank and non bank financial institution which fails to comply with section 23 of Act 749, as amended. The act requires every financial institution to conduct effective Customer Due Diligence (CDD) on all its customers. Related to this, is conducting CDD on cross- border correspondent banking. Failure to do it, also attracts a sanction of 2000 penalty units.


Every bank and non bank financial institution is trying it best to offer its customers digital product and service to enhance customer satisfaction. Due to this, every financial institution that offers these products and services have to develop and implement risk assessment for new technologies (digital products) and Non face to Face product and distribution channels. Failure to comply with section 40 (2d) of Act 749, as amended and section 18 (5) of the Banks and SDI Act, 2016 (Act 930) attracts minimum of 2000 penalty unit.


Section 30 of Act 749, as amended requires every financial institution to report unusual and complex large/ suspicious transactions to the FIC. Failure to report such transactions attracts minimum of 5,000 penalty units.


Every financial institution need to develop and implement internal rules, procedures and policies to enable staff members to identify and report any suspicious transaction and behavior as stated in section 40 of Act 749, as amended. Any bank or non bank financial institution that fails to comply with the Act, is sanction minimum of 4,000 and 2,000 penalty units respectively.


Shell Banks are financial institutions that don’t have any physical presences in any country. And any financial institution that conduct business with them will be sanctioned minimum of 5,000 penalty units.


Any financial institution in Ghana that has foreign branches and subsidiaries should ensure that these foreign branches and/or subsidiaries comply with all the AML/CFT provisions as stipulated in section 40 (5-6) of Act 749, as amended. Violation of this section attracts minimum of 2,000 penalty units.


One of the measures in fighting money laundering and terrorist financing is the creation of awareness through employee education and training programs. Also new employees hired need to be screened (proper background checks) and AML/CFT performance made part of the employees annual appraisal. Failure to comply with part 1.25 of the AML/CFT guidelines attracts a sanction on 5,000 penalty units. Related to this section is the monitoring of employee conduct, failure to do that attracts 2,000 penalty units


To ensure that AML/CFT program of the financial institution is working effectively and efficiently, there is the need for an independent audit by the Internal Audit Unit of the financial institution. Section 85 (2)(d) of Act 930 requires External Auditors to express an opinion on the effectiveness and efficiency of financial institution AML/CFT compliance program. Also part 1.30 of the AML/CFT guidelines states that an independent testing of the compliance program of financial institution must be done. Failure to undertake an independent audit attracts 3,000 penalty units for Banks and 2,000 penalty units for Non Bank Financial Institutions.


The AML/CFT compliance program, policy, manual, and Risk Assessment Framework of financial institutions should be approved by the Board as stated in part 1.31 of the AML/CFT guideline. Failure to comply with this clause attracts 2,000 penalty units


Part 1.34 of the AML/CFT guideline requires Money or Value Transfer (MVT) service operators to maintain a current list of agent and subagents and send quarterly returns to BoG. MVT operators shall assess their agents and subagents AML/CFT controls to ascertain its effectiveness. Failure to comply with this directive attracts a minimum of 3,000 and 2,000 penalty units on banks and non bank financial institutions respectively.


If financial institutions think the implementation of the directives, laws and regulations on Anti-Money laundering and/ or Combating Terrorist Financing is expensive, then they should try the cost of non-compliance (ignorance). Financial institutions and other companies should try and invest in technologies and other techniques to fight money laundering and terrorist financing so that they can avoid sanctions and penalties from their regulators.


This sanction regime should not be seen as something which only affects financial institutions in Ghana but regulators in other industries (sectors) should institute same, in order to help fight money laundering and terrorist financing.


If you require further information on this article, please contact Richieson @richieson.gyeniboateng@gmail.com

By Richieson Gyeni-Boateng, CAMS


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