Month: February 2014

PEP Alert: France recommends eight for UN sanctions list

Sara Barclay Uncategorized

TroubleinParadise's avatarFinancial Crime Asia

Not Asia focused for once, but in keeping with the law of identity (A is A) and more poetically by Gertrude Stein (A rose is a rose is a rose) a PEP is a PEP is a PEP, it is probably worth a glance at the eight Central African politically exposed persons (PEPs) that the  French government has recommended be the subject of UN sanctions.

CREDIT: REUTERS/LUC GNAGO CREDIT: REUTERS/LUC GNAGO

All eight PEPs are connected to the Central African Republic and the select group of individuals includes former President François Bozize, according to this report from Reuters in Paris.

Back in December, the UN backed an intervention to stem sectarian conflict in Central African Republic (CAR), which began when Muslim Seleka rebels seized power in the mostly Christian country. In January, the UN issued a shot across the boughs to the CAR when it mooted the possibility of travel bans and…

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Are we guilty of stopping investment in the developing world?

Sara Barclay AML/CTF , , ,

Compliance monkeyOne of the questions that I am asked when undertaking Anti-Money Laundering and Combating Terrorist Financing (“AML/CTF”) training is “should we just stop dealing with areas and customers that have a higher risk of money laundering and terrorist financing”? Why is it that people believe that Licensee’s and Guernsey must stop any business that may have a higher risk of money laundering terrorist financing? Has this led to a paranoia within our financial industry and could this be leading our industry to be potential uncompetitive and lacking the entrepreneurial spirit that directors, management and compliance officers should aspire to? Most importantly is our paranoia stopping us from providing investment into the developing world and allowing these people to remain in poverty?

The laws, regulations, codes, rules and guidance (“the Framework”) as published by the Guernsey Financial Services Commission (“Commission”) require that licensees have suitable and sufficient policies procedures and controls for the products and services provided to customers in order to protect the Licensee and the Bailiwick of Guernsey from being susceptible to money launderers and terrorist financiers. Licensee’s must not avoid their responsibilities or manipulate the framework, but ensure that at all times they conduct their business within the Framework. The Commission does not prohibit engagement with higher risk clients or Licensees and their customers being engaged in sensitive activities that are of a higher risk of money laundering or terrorist financing, only that licensees mitigate the risks suitably and demonstrably.

The policies, procedures and controls of a Licensee must meet the minimum requirements of the Framework, though there is nothing stopping a licensee from exceeding these requirements. The Framework is merely requiring Licensees and their employees to be able to identify and verify their customers, understand the reason and rationale of their customer in order that they can assess whether the use of the product or service is reasonable. The Framework also ensures that the minimum required information on a customer is obtained and can be provided by the licensee expediently to Regulators or Law Enforcement if required.

The Licensee must assess its customer’s not on prejudice or paranoia but on a risk based approach at the start and during the business relationship ensuring that they have sufficient knowledge and information on their client as required by their risk based approach and the Framework. Just because a customer is a higher risk of money laundering and terrorist financing does not necessarily mean that they are a criminal, just that the activities or the jurisdiction amongst other things may make the customer or their activities more susceptible to money laundering and terrorist financing and that more frequent monitoring is required to be undertaken.

 There are many opportunities in the developing world that will not only allow our customers to prosper but also the people of these jurisdictions to also prosper and be able to move themselves out of poverty.Telecommunications, mining, agriculture and cash machines are some of the business propositions that I have seen being presented to licensees by their customers only to be met by the paranoia that these may expose the licensee to money laundering or terrorist financing and must be avoided or declined.

Should the question that licensees ask when they take on customers or provided products or services to a client relate to the Licensee’s knowledge and experience of the customers activity, and if the policies, procedures and controls of the licensee are suitable and sufficient for this type of activity? If the answer is no can the Licensee enhance their knowledge or policies, procedures and controls or oversight of the customers activity to become comfortable in undertaking the engagement.

By acting in paranoia it is the Licensee and their employees not the Commission or the Framework that is letting customers down and the people of these developing countries. In some ways it could be argued that we are allowing money laundering and terrorist financing to prosper by not engaging with the development of legitimate business and opportunities in these developing countries.

We can never eradicate money laundering and terrorist financing, but by ensuring that a Licensee’s policies procedures and controls meet the requirements of the Framework I believe that they can engage with customers and activities that will provide a benefit to people in developing countries and enhance the living conditions and education for all. Would it not benefit these countries and people if by applying our high standards that money laundering and terrorist financing in all guises could be reduced?

Diversity in the Boardroom

Sara Barclay Corporate Governance , , , ,

Lloyds Banking Group have committed to diversifying its business dynamics by pledging to make 40% of its senior executives women by 2020.  This good news story has though, been followed up by the news the Women attendees at Davos have slightly decreased, in essence still showing that the female proportion of the world population remains largely undervalued, unrecognised and potentially discriminated against.  Why is it that this amazing untapped natural resource remains under used and underappreciated?

It is well-known that to have a successful business you need to have an entrepreneurial Board that considers the risks faced and applies their collective experience to the issues while individually challenging ideas and mitigating risk.  Diversity in the Boardroom allows a safeguard against reckless behaviour or the undertaking of risk for self-interest allowing entrepreneurial spirit to flourish.  Diversity brings different skills, knowledge and backgrounds allowing the Board to collectively become stronger allowing greater stewardship of a Business whilst decisions and business opportunities can be openly challenged and investigated. With this in mind why is it that there is still a gender gap? Why is the Boardroom still the domain of the male executives in general? Should we go further than gender itself in order to continue to ensure that our financial industry remains at the forefront of the international finance sector and global financial community?

I believe that the reason that the Boardroom remains a bastion of the Male senior executive is down to education, opportunity and succession planning. Without education or equal opportunities the calibre and number of candidates to undertake these roles is significantly reduced. Whilst without the long-term succession planning of a business, education and career advancement opportunities for employees cannot be identified or put in place, this worryingly may lead to potential candidates becoming disillusioned.

Throughout my various roles I have had the opportunity to work with people of all genders and I truly believe that this has allowed me to develop personally for the better and has advanced me in my role as a compliance specialist.  I have always fitted a person to role in respect of knowledge and experience they possess rather than preconceived ideas of gender. I now find myself in a position where some of these people have succeeded in obtaining their goals, some have even surpassed me and this gives me the hunger to continue to challenge myself and achieve. I can’t help but smile at their achievements.

I have been lucky enough to be invited into the Boardroom to deliver my reports and provide advice.  Where the Board has been diversified by gender, I found that they were more confident, open to challenge and discussion. These Boards reviewed in-depth my reports and advice and sought through their individual integrity to collectively come to a decision that benefited the company from a holistic approach of regulation, best practice and the business of the company.

It is unfortunate to say that I have also delivered my reports and advice to Boards that have been male orientated and at times had a stagnant corporate governance culture.  In some of these cases my reports and advice were treated more as hindrance to the business and not considered in-depth due to a lack of challenge by the other Board members.  This has led to regulatory consequences that could have been avoided with the regulator pointing to a failure in corporate governance.  I can’t help but feel sadden by the cost in remedial action and reputation and the personal cost this has caused, due to a lack of diversification.

Though I believe in diversification I am against positive discrimination, as this can unintentionally lead to the achievements of people being discounted and discredited, this serves no purpose but to demoralise the person or a workforce and at worst create distrust and aggression through bullying.  By businesses taking the Lloyds example, over a period of time they can establish suitable practices for education and opportunity for all persons and allowing for successful succession planning to be put in place.  Allowing for people of any gender to be enthused to obtain education and seek challenging opportunities, this can only lead to a better and stronger corporate governance culture.

While the negative connotations surrounding gender must be challenged and put to the annals of history, I believe that the attributes of a person must be considered above gender.  It is often too easy to follow a fashion and rather than enhancing the Board or the Company, you increase the likelihood of a weak or defunct corporate governance system with a greater potential for reduced productivity or business capability, reputational damage and regulatory sanction. It also does not assist in the challenging of gender inequality.

The Board need the best people for the job at hand regardless of gender and we are in times where decisions made by Boards are being challenged by various stakeholders.  There are high-profile cases where failure of a business was down to self-interest, and unacceptable risk taking due to a failed corporate governance framework that could have been avoided by diversification of the Board by suitable qualified and knowledgeable persons, allowing for the challenge of business practices and decisions.