Due to the ever-changing AML/CFT legal and regulatory landscape, subject persons must have a dedicated function that periodically evaluates the adequacy and efficacy of their policies, procedures, measures, and controls to ensure that they comply with the relevant requirements. An independent external AML audit is essential for locating the most urgent problems with the subject individuals’ AML/CFT controls and procedures because it provides an objective, unbiased viewpoint and unbiased understanding of the subject individuals’ AML/CFT approach. Subject entities can benefit from external independent AML reviews and audits in several ways, including facilitating the prompt identification and appropriate mitigation of risk, eliciting an accurate understanding of the subject entity’s standing in terms of AML/CFT compliance, helping subjects keep up with the pace of regulatory and legislative change; and generating remedial action-plans to implement and maintain the evolving requirements in practice.
Employing an independent AML audit function to assess the efficacy of the subject persons’ activities continually is emphasized by the local regulatory framework. There is no hard and fast rule about how often these independent AML audits must be performed. Still, it’s good practice to have them done at least once a year and whenever there are significant changes to the regulations.
Subject persons may focus on thematic or targeted areas from year to year, which is identified as posing a higher level of risk through the subject persons’ business risk assessment. It simply suggests that an annual complete and thorough AML inspection should be performed unless the scale and nature of the company demand a different course of action. Customer onboarding and due diligence practices, transaction monitoring systems and processes, and risk assessment and management methods are all examples of what may fall under this category. Therefore, the design and scope of these AML audits should be determined risk-based.
A lot of positive outcomes come from having an impartial AML audit performed. Subject Persons may get a more complete and objective picture of their technical compliance and the efficacy of their AML/CFT strategy by working with external consultants to evaluate, enhance, and align their policies, processes, measures, and controls with the relevant regulatory framework.
An independent AML audit produces periodic and impartial reports with well-informed and workable suggestions. In addition, regular independent AML audits will improve the subject’s reputation across all constituencies, including customers, investors, and authorities. Adopting such a practice is particularly encouraging for regulators since it shows that subject people are willing to go the extra mile to meet regulatory expectations.
Contributions and recommendations from independent AML auditors can be included into the subject person’s procedures and processes. It must be shared with staff and significant stakeholders to raise awareness of their major pain points, adopt practical recommendations, and optimize their functions. In addition, by conducting independent AML audits regularly, subject persons can make sure that any gaps or omissions in their AML/CFT strategy are remedied promptly, ensuring that they are always compliant and ready for potential regulatory examinations, protecting them from fines and reputational harm.
When making decisions on logistics, it’s essential to keep the audit’s stated objectives in mind. Communication is also crucial for successful independent AML reviews. The independent AML audit is not a regulatory assessment. Still, a systematic and collaborative exercise focused on the AML/CFT strategy of the subject individuals, with the primary objective of identifying the critical areas for development and making concrete recommendations for advancement. Maintaining open communication and feedback loops to promote continual development in the subject persons’ AML/CFT strategy is essential if the auditors are to get the most significant and representative knowledge possible.