The Monetary Authority of Singapore (MAS) announced on 24 May 2016 that it has served BSI Bank Limited (BSI Bank) notice of intention to withdraw its status as a merchant bank in Singapore for serious breaches of anti-money laundering requirements, poor management oversight of the bank’s operations, and gross misconduct by some of the bank’s staff.
Although there were many control failures, serious breaches of regulations, unacceptable risk culture and acts of gross misconduct by the staff, it all boiled down to management oversight. In most banks, the management has to set the tone for company-wide AML culture. Here, we take a look at what are the management roles in AML in a bank, which can be adapted to help strengthen the AML compliance system in any businesses.
What is management oversight and why is it so important? This can be looked at through the eyes of the Board of Directors and Senior Management.
Board of Directors
The Board of Directors has the role and responsibility of:
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The Board provides governance, guidance and oversight to senior management. It is responsible for setting the broad strategies and major policies of the organisation and approving the overall organisational structure. The Board has the ultimate responsibility for ensuring that an adequate system of internal controls is established and maintained. Effective Board members are objective, capable and inquisitive, with a knowledge of the activities of and risks run by the bank. A strong and active Board, particularly when coupled with effective upward communication channels and capable financial, legal, and internal audit functions, is often best able to ensure the correction of problems that may diminish the effectiveness of the internal control system.
The Board should include in its activities:
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One option used by banks in many countries is the establishment of an independent audit committee to assist the Board in carrying out its responsibilities. The establishment of an audit committee allows for detailed examination of information and reports without the need to take up the time of all directors and ensures that the particular questions concerned receive proper attention. It should be noted that in no case should the creation of an audit committee amount to a transfer of duties away from the Board, which is legally empowered to make decisions.
Senior Management
Senior Management should have responsibility for:
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