You are the head of compliance for a firm in a jurisdiction and sector of your choice. Rather than a single central office in which all areas of the business are based, the firm operates from multiple sites throughout the jurisdiction and, consequently, there is little day-to-day interaction amongst the firm’s staff working in different areas of the business. With the aim of encouraging interaction, regular training and development days are scheduled, during which members of different departments present short sessions on their own area of business, providing insight into their activities and how these relate to the overall aims of the firm. You have been invited to present a session at an upcoming training event. Due to the continuing fast-paced development of the regulatory environment within which the firm operates, you have identified that it will be useful for attendees at the session to more fully understand the current regulatory environment and also the importance of regulatory compliance, both for the firm and the industry, as a consequence of that environment.
With the above in mind, produce a plan that clearly sets out the topics that you will cover during the training session and the materials that you will use in support of this. You should state the objectives of the session, what will be covered and why, how you will deliver the session and how you will ensure this is effective in meeting its brief. However, the detailed content of the training is not required.
You are a senior member of the risk management team in a regulated firm in a sector and jurisdiction of your choice. As part of your role you regularly carry out training with staff from across the business to ensure understanding of how your firm’s risk management process operates and how it is used within different business functions. A new member of staff has recently been recruited into the compliance team and you have been asked to spend some time with them to ensure they too understand the basics of the risk management process.
- Explain to the new member of compliance staff who has no previous knowledge or experience of risk management practices:
- what the above diagram represents
- what its purpose is within the risk management regime, and
- why it is of relevance within a regulated firm.
- Select two products or services offered by your chosen firm. Using these products or services as the basis, explain to the new member of compliance staff the risk assessment process in place within your firm to help them understand this process. In doing so:
- compare and contrast the two products or services from a risk perspective, and
- briefly explain each stage of the risk assessment process.
(Total 25 marks) Question 3
Worldwide is a firm newly regulated in a jurisdiction and sector of your choice. The recently appointed head of compliance has been given a mandate by the executive board to design, implement and manage the compliance function and is due to attend the next board meeting to provide an overview of these plans. The compliance function is part of the risk division within the firm and in their new role the head of compliance reports to the director of risk.
Prepare a report for the executive board to accompany the presentation by the head of compliance at that meeting, taking the board through the key steps required in this process, identifying the critical success factors along the way. The report should also make clear what the main challenges to the successful completion of this programme are and explain why these are the main challenges, as well as providing a clear indication of how these can be managed.
An experienced compliance manager, you have recently joined a bank regulated in a jurisdiction of your choice. Due to a management reshuffle, there is temporarily an absence of a specifically designated Money Laundering Reporting Officer (MLRO). The firm’s board has now asked you to ‘fill in’ for the MLRO role in the short term, stating that recruitment is well under way, so it should only be for ‘a matter of weeks’. Having been informed of your interim responsibility, Mr Jones, one of the back-office support staff for the customer relationship managers (CRMs), has requested a meeting with you.
At the meeting, Mr Jones spells out his concerns about Mr Smith, who is the top performing CRM and deals with a number of very wealthy, internationally mobile, customers. Mr Smith does not allow any of the other CRMs to work with ‘his’ clients; even when he is on annual leave he remains available for clients to contact.
Mr Jones mentions a Mr Adams in particular and reports that the documentation held by the Bank about Mr Adams contains ‘very little detail’. Mr Adams is apparently a well-known figure in his home country, where a petro-chemical firm to which he has links maintains a number of government contracts; these are facilitated through his brother who is a high-ranking army general. He commonly uses your Bank to transfer money across jurisdictional boundaries.
In terms of customer documentation, Mr Jones informs you that the Bank actually holds very little. Despite Mr Jones’s numerous reminders, Mr Smith seems to keep ignoring or misplacing even the most basic customer due diligence (CDD) information that has been requested of him. When pressed on this, Mr Smith told Mr Jones to ‘back off’ stating that the customer is ‘a wealthy businessman, bringing a lot of money through the Bank, which is keeping everyone happy’.
The balance of Mr Adams’s accounts currently exceeds $20 million.
- Identify three of the principal areas of concern in the scenario above and the main risks that these represent to the firm, explaining why these issues are of concern.
- Recommend to Mr Jones, and your firm, the next actions to take, and explain why these should be taken.
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