Thornmark Asset Management Inc. May 29, 2012 Slide 1
AML program aligning training to requirements IDENTIFY REQUIREMENTS Key steps to developing a FINTRAC FINTRAC successful training Interpretation PCMLTFA 5 Regulations Guideline program are to Notices ensure that you s (FINs) identify and interpret the requirements. “The Act” Used to carry out Plain language Technical This establishes the the intent of the guidelines to interpretation of foundation for Act explain Act & certain policies and Regulations provisions procedures that are customized to your INTERPRET REQUIREMENTS business and ultimately training materials to ensure Hire that employees can Read Consult Attend Lawyers/ carry out the Guideline Act/Regs, Seminars requirements of the Consultant s if needed (PMAC) policies and s procedures. DEVELOP AML P&P and TRAINING Slide 2
AML training requirements Who? • The Proceeds of Crime (Money If you have more than 1 employee, you need a training program – Laundering) and Terrorist Financing Anyone who has AML touch-points (client-facing, transaction – Act (PCMLTFA) review, senior management, compliance personnel, IT personnel) requires that companies have What? • ongoing compliance Training program must be in writing – training. Where/How? • Delivered in any manner that best suits your company (face-to- – face, web, etc.) When? • Business-specific, with requirement to train client-facing personnel – before they are client-facing Why? • Because potential fines and jail time are substantial! – Slide 3
Thornmark AML training content and frequency New Employee On-Boarding • Thornmark provides training to new AML training specific to role – employees as they are hired, to all PENSIVO training – employees annually, Annually • with more detailed training provided PENSIVO training for all employees – every 2 years. 1st Year o • AML – Securities Dealers, Part 1: Legislative & Regulatory Requirements • AML – Securities Dealers, Part 2: Compliance & Suspicious Activities 2nd Year o • AML – Securities Dealers, Part 3: Refresh and “BDSC’s Case” Every 2 years • Training at an office meeting – Using Thornmark’s training document, including question and answer period o Other • As necessary, related to changes in regulations, p&p, or other developments – Slide 4
Thornmark AML training audience and evidence of training 2 groups • More detailed training is provided Client-Facing (including compliance) – to those in client- facing and Training materials + appendices o compliance roles and Non-client facing evidence of all – training is kept on Training materials o file. Evidence of Training • Training at Office Meeting – Meeting minutes are taken to evidence meeting o Each employee completes a sign-off sheet confirming that they o understand their PCMLTFA requirements, have attended the office training and have completed the PENSIVO online training PENSIVO – Participants receive certificate signifying successful completion o Slide 5
Thornmark AML training summary of 5 key training points 1. Definitions Employees are asked Money laundering : any act or attempted act to disguise the source of money or assets – to remember these 5 derived from criminal activity key training points. Terrorist financing : provides funds for terrorist activity – 2. ID Clients and Collect All Client Records Ensure that ID documents and client records are complete (follows Thornmark’s regular – processes) 3. Suspicious Transactions and Suspicious Attempted Transactions Thornmark is required to report when there are reasonable grounds to suspect that a – transaction or attempted transaction is related to money laundering or terrorist activity financing Review examples in training materials and understand how they apply to Thornmark’s business o Be Aware of Third Parties and Politically Exposed Foreign Person’s (PEFPs) 4. When an account is opened, Thornmark takes reasonable measures to determine – whether it is to be used by or on behalf of a third party or if the person is a PEFP 5. Potentially Large Penalties and Prison Time for non-Compliance Failure to report a suspicious transaction could lead to up to 5 years imprisonment, a fine – of up to $2MM, or both Penalties for failure to report do not apply to employees who report suspicious transactions to o superior Slide 6
Thornmark AML training examples Providing examples related to your business is a great teaching • Employees are provided with method, in order for employees to understand context examples of things to look for that are Provide examples for placement, layering and integration – specific to Thornmark’s Provide situations of when the company would expect a suspicious – business transaction report to be filed Use key words: discomfort, apprehension and mistrust o Use pictures to promote understanding: – Slide 7
Thornmark AML training a few FINTRAC “dos” and “don’ts” Ensure that your AML materials are specific to your business • A number of PMAC firms have been Guidelines – through a FINTRAC Don’t just copy and paste the FINTRAC guidelines and consider this audit recently and o there are some your p&p manual consistent themes. Training – Don’t take the FINTRAC examples from the guidelines without o considering how they specifically relate to your business Risk Assessment – FINTRAC states that their risk assessment template is only a starting o point and that companies need to specifically tailor for their circumstances Brush up on the details • After submitting your required documents to FINTRAC, they will – conduct a follow-up phone call in which they will ask very specific questions about the requirements (e.g., “how many days do you have after month- end to file your terrorist report”) Slide 8
Thornmark AML training additional resources Other references… To further quench your thirst for knowledge, please reference • the following: Canadian Anti-Money Laundering Institute – Training programs and designations o http://camli.org/ o IIROC AML document – Comprehensive document, which provides requirements for securities o dealers (note that some components are IIROC-specific) http://www.amlcompliance.ca/wp-content/uploads/2010/11/IIROC-Anti- o Money-Laundering-Compliance-Guidance-Oct-2010.pdf Slide 9
Thornmark Asset Management Inc. May 29, 2012 Slide 10
Anti-Money Laundering Compliance Training Your Employees May 29, 2012 Presented by Alana Dubinski, Stonegate Private Counsel, a division of CI Private Counsel LP
How Vulnerable is the PM Industry? Depends on your business model – Products & Services Hedge Funds & Offshore Funds & Use of Complex Private Pools Accounts Account Structures • Exempt distributions attractive to criminal elements due to lesser registration and prospectus requirements • Proliferation of hedge funds due to profitability, limited liability in the case of LP’s, lowering account minimums attract greater number of investors • Deal in large sums of money – minimum investment of $150K • Offshore fund investors often use shell companies and trusts or complex structures making beneficial ownership difficult to identify • Offshore funds are exempt from certain tax reporting and attract certain classes of investors that don’t stand out amongst the same client base • Pooling investor funds and paying out returns in proportional shares, as well as minimum hold periods makes it difficult to trace source of funds Source: Oracle Financial Services, Hedge Funds and Anti-Money Laundering White Paper, October 2009
AML Compliance Regime for PM’s • PM’s AML compliance regime must be tailored to the risks of its business • It’s training program should respond to the types of clients it deals with and the products it distributes • An effective training program includes, – educating individuals to identify ‘red flags’ in the course of opening new accounts/accepting deposits – empowers individuals to confidently assess incidents of attempted suspicious transactions and know how/where to report
Using a Risk Based Approach – What does this really mean? “The systems for classifying and managing risks… must be tailored to the specific features of the entity, such as its structure, size, organization, resources, work force and risk factors. No particular methodology or system is imposed. Authorized entities must determine their own risk levels and manage their risks effectively using appropriate procedures and in keeping with their individual characteristics.” - AMF guidelines clarifying certain provisions of the General Regulation regarding the prevention of money laundering and terrorist financing, March 15, 2010 • Factors to help determine the risk of your business include: • Jurisdictions firm operates in and its registrations → Canada vs. Intl. and solely PM vs. PM/EMD • The types of clients the firm deals with → Institutional vs. Private Client • The products the firm distributes → Hedge/Private Pools vs. Mutual Funds • Whether the firm handles cash and securities/own banking facilities • Custody of assets → 3 rd party custodian vs. own custody
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