As you read this, I fully intend to be sitting at a chi-chi patisserie in a cobbled square in the High City area of Luxembourg, sipping a fruit juice and nibbling on a spectacular cake of some sort. See – there’s the Grand Ducal Palace! In fact, is that Henri himself waving from a balcony? I am in town to speak at a conference hosted by the local institute of directors, and my topic – no surprises here – is AML for directors. Luxembourg’s AML regime has recently been updated, bringing its directors more into line with those of other advanced jurisdictions when it comes to AML oversight responsibilities, and I am here to try and explain to them how to make sure that they understand enough about AML requirements to be able to discharge those responsibilities effectively.
I have addressed similar audiences before, and I am determined to get across to them one of the most important lessons that I have learnt over the years from regulators in many jurisdictions, and – sadly – from a few MLROs who have fallen foul of this lesson. And it is this: show your workings. Remember *swirly effect to show passing of time* when you did your maths O level, and your teacher always said, “Show your workings – even if your final answer is wrong, you’ll get some marks for using the right process”? Well, the same thing applies to AML – particularly now that we’ve gone all risk-based about it. If you are deciding what risk category to apply to a client, for instance, you should record all your deliberations and the factors you took into account and the emphasis you placed on them. And then, even if the regulator disagrees with your ultimate decision, you can show that it was not taken lightly, not just a finger-in-the-air guess, or a tick-box approach. (I choose this as an example because it was the very point made in December 2013 by the Guernsey Financial Services Commission in their annual presentation to industry: “Licensees are encouraged to ensure that their policies and procedures reflect the importance of maintaining a record of the reasons or rationale relied upon in assigning a given risk rating.”)
So for my Luxy directors, I will be encouraging them to think carefully about how they can challenge their firms’ AML regimes, and even more carefully about how they can demonstrate that they have done this. And it’s not simply a paper exercise, to appease the regulator. I always find that writing something down means that you have to make doubly sure that it both makes sense and holds water – lazy assumptions and illogical conclusions are that much more obvious on the page than in the air. Now if you’ll excuse me, I have some cake to finish.