Elements of an AML Program Flashcards

What is a 'look-back review' in the AML context and when is it typically required?

Answer: A retrospective review of transactions and accounts covering a past period, typically triggered by discovery of a significant control failure or regulatory requirement to identify previously missed suspicious activity

A look-back review involves retroactively examining transactions and accounts for a specified historical period to identify suspicious activity that should have been detected and reported under a functioning AML program, typically ordered following discovery of a serious control failure.

How should AML compliance programs be structured when an institution operates in multiple countries?

Answer: Establish a global minimum standard based on the most rigorous applicable requirements, with local country-specific additions to meet host country laws; coordinate global risk assessments while adapting controls for local market conditions

Multinational institutions must meet the strictest applicable requirements across all jurisdictions — typically establishing a global minimum standard and layering local requirements on top — while maintaining enterprise-wide visibility through coordinated risk management.

What is a 'pre-implementation review' in the context of new products or services?

Answer: An AML/CFT risk assessment conducted before a new product, service, or technology is launched to identify potential money laundering risks and ensure adequate controls are in place prior to launch

A pre-implementation risk review requires the AML compliance function to assess ML/TF risks of new products or services before launch, ensuring controls are designed and implemented proactively rather than retroactively discovering AML gaps after the product is live.

What is the purpose of a 'compliance testing' function within an AML program, distinct from audit?

Answer: Compliance testing is ongoing quality assurance conducted by the compliance function itself to identify and remediate control weaknesses before formal audit reviews, providing first-line feedback on program effectiveness

Compliance testing (also called compliance monitoring or quality assurance) is a second-line function that proactively tests whether AML controls are operating effectively, identifying weaknesses before formal audit and supporting continuous improvement.

What is 'regulatory examination management' and why is it an important AML program component?

Answer: The process of preparing for, managing, and responding to regulatory examinations of the AML program, including organizing documentation, coordinating staff responses, addressing findings promptly, and implementing corrective action plans

Regulatory examination management ensures the institution is always examination-ready, that examiners have efficient access to required documentation, and that findings are addressed promptly through documented corrective action plans.

What is the role of 'senior management' in BSA/AML compliance, distinct from the compliance officer and the board?

Answer: Senior management is accountable for implementing the board-approved AML program within their business lines, ensuring adequate resources, and creating a culture of compliance that supports effective AML controls

Senior management is responsible for implementing the AML program within their business lines, allocating necessary resources, supporting the compliance function's authority, and fostering a culture of compliance that makes AML effective in practice.