Financial services firms and other obligated entities are required to undergo an independent review of their AML/CFT compliance program, commonly known as the “4th Pillar.” Clients may not have the dedicated personnel to focus solely on AML/CFT compliance or compliance officers may be overwhelmed, as they often are, trying to keep up with other statutory and regulatory requirements.

 

The AML/CFTP statutory and regulatory requirements require Clients to perform AML/CFT audits. Non-compliance with AML/CFP statutory and regulatory requirements can result in significant fines and other regulatory actions. While the frequency of audit is not specifically defined in any statute, a sound practice is for the financial institution to conduct independent AML/CFT audits generally every 12 to 18 months, commensurate with the AML/CFTP risk profile of the financial institution.

 

Having a compliant AML/CFT program requires daily operations and procedures to be undertaken in accordance with statutory and regulatory requirements. Failing to do so can have undesirable consequences for Clients, including regulatory violations, penalties, monetary fines, and regulator involvement. To avoid such outcomes, regulators require Clients to implement a comprehensive AML/CFT audit model with the purpose of properly identifying any weaknesses or deficiencies within AML/CFT onboarding and operations, and for those measures to stand up to audit or regulatory scrutiny. 

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Objectives of the Audit on AML/CFT Practices and Risk Management Systems 

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The general objective of the AML/CFT audit of Clients is to enable the firm to express a professional opinion on the adequacy of Clients’s AML/CFT compliance program, and on compliance with statutory and regulatory requirement for the relevant period. The specific objectives of the AML/CFT audit are as hereunder:

 

• To inform the board of directors and senior management of weakness, or areas in need of enhancements or stronger controls.

• To provide sufficient information for the board of directors and senior management to reach a conclusion about the overall adequacy of Clients’s AML/CFT compliance program. 

• To uncover any violations of statutory and regulatory requirements in Clients’s AML/CFT practices and risk management systems.

• To identify areas for remediation.

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