As we embark on a new year, it is a great time for regulated financial institutions to turn their focus to planning ahead for annual regulatory requirements. One such obligation is the independent AML audit.

The AML audit was introduced as an annual requirement in 2016 and provides the organisation, and its regulator, with assurance that the operations are compliant with legal and regulatory requirements under the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (as amended).

The scope of the AML audit, at a minimum, should involve reviewing and testing the elements of an organisation's anti-money laundering and antiterrorist financing framework, namely the business risk assessment, internal policies and procedures, and internal controls.

Adopting merely the tick box approach to the audit may still provide assurance that the framework is compliant, but the organisation may lose a great opportunity to assess whether the programme is operationally efficient and is keeping pace with regulatory and technological trends.

In order to gain maximum value, the audit should deliver practical, risk-based recommendations that improve the effectiveness of the framework and the efficiency of internal processes.

With this in mind, here are key points to help your organisation get the most value from the audit.

1. Ensure the AML auditor possesses the necessary compliance skill, expertise and qualifications

In July 2021, the Bermuda Monetary Authority released draft updates to the Guidance Notes for Anti-Money Laundering & Anti-Terrorist Financing (AML/ATF) Regulated Financial Institutions on AML/ATF.

One proposed amendment states that the AML/ATF auditor must be adequately qualified, which is demonstrated by evidencing subject matter expertise and proficiency. Therefore, when selecting an auditor, organisations should consider the following:

•Expertise – Does the auditor have a breadth of experience both within a compliance team and in an advisory capacity? Does this experience demonstrate an understanding of how the implementation of regulation impacts the outcomes of the organisation?

•Proficiency – Does the auditor have a good reputation for delivering a high quality service? Have their recommendations resulted in positive outcomes for the organisation and its customers?

•Professional Education – Does the auditor possess advanced compliance qualifications? Highly regarded qualifications include the International Compliance Association (ICA) Diploma in Anti-Money Laundering and/or the Association of Certified Anti-Money Laundering Specialists (ACAMS) Advanced CAMS-Audit.

2. Identify and remediate files before the audit commences

Failure to prepare is preparing to fail, and the AML audit is no exception. To get the most value from the audit, organisations should ensure that files are well organised and legacy issues are remediated beforehand, as this enables the auditor to focus on the best possible version of the framework.

In order to achieve this, we recommend:

•Updating your business risk assessment to ensure any material changes have been captured;

•Updating your policies and procedures to align with any regulatory changes that have occurred;

•Implementing any previous audit recommendations; and

•Conducting internal sample testing in order to assess implementation of your policies and procedures.

3. Be open to enhancing operational processes

As mentioned, some audits focus on minimum regulatory requirements, which may result in an organisation implementing a remediation plan aimed solely at avoiding enforcement issues.

What organisations should also consider is the impact these recommendations could have on internal processes, as simply adding more rules to a policy handbook may negatively affect customer experience, add burden to already strained compliance resources, and increase costs.

To counter this industry norm, the audit should focus on both regulatory assurance and operational improvement by providing the organisation with 'enhancement opportunities' aimed at prioritising resources, reducing cost and improving customer experience, all of which add a competitive advantage that could result in increased revenue.

Michael Wynne is senior vice president of Walkers Corporate (Bermuda) Limited Michael.Wynne@walkersglobal.com