PDF Understanding Risk Management and Compliance, What is different after Monday, May 20, 2013

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How do you know who is your supervisor? If in doubt get in touch with anyone of the supervisors and they will point you in the right direction. What happens if you come under two supervisors? The supervisors have a process in place for when this situation arises.

Reporting entities will only have one supervisor.

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That supervisor can call upon another supervisor to assist where certain products or services offered by the reporting entity fall outside the leading supervisors area of expertise, for example, a reporting entity that offers both life insurance products and collective investment schemes. Contact the relevant supervisors so that this process can be implemented. Is there a register of reporting entities? There is not a register in a legal sense but we do keep lists.

If you or any reporting entities you know aren't on the FSPR, let us know. What is a ministerial exemption? The Minister of Justice is empowered under section to make exemptions from any or all of the provisions of the Act. Exemptions may be granted for businesses, transactions, products, services or customers and may be subject to conditions.

What obligations are placed on firms? Basic obligations imposed on reporting entities include:. Reporting entities have considerable flexibility within the limits prescribed by the Act and Regulations, in how they meet their obligations. What are the record-keeping requirements for evidence of staff vetting performed?

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What is CDD? CDD involves: a gathering information about customer identity b verifying a customer's identity, to ensure the customer is who they say they are.


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In most cases, reporting entities will also need to establish and verify the identity of any beneficial owner, meaning the individual who ultimately owns or controls the customer or on whose behalf a transaction is conducted. CDD also involves establishing and verifying the identity of any person who acts on behalf of a customer. The code is not mandatory but provides a 'safe-harbour' if followed correctly.

If a reporting entity decides to opt-out of this Code, it must adopt practices that are equally effective. What is ongoing CDD? Ongoing CDD means regularly reviewing customer information and having systems to conduct account monitoring. Under section 31 of the Act ongoing CDD is required to ensure the ongoing business relationship is consistent with the reporting entity's knowledge about the customer's business and risk profile and to identify grounds for reporting any suspicious transaction.

This is required for all customers, including existing customers. What are PEPs? Politically-exposed persons PEPs are individuals who, by virtue of their position in public life, may be vulnerable to corruption. Reporting entities are required to give specific consideration to the risks involved with PEPs and should:. What if someone doesn't have a passport and they don't drive? In order to comply with the code you will need to put in place exception handling procedures for these customers.

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Note that exception handling should only be used where the person genuinely does not hold the identification documents, not where they have just left them at home. What happens if I take over an existing customer base? If the customers are existing customers of the reporting entity, you aren't expected to do CDD on all of those customers right away, but you do need to review them periodically ongoing customer due diligence to make sure you have the correct information.

You must obtain further CDD information if there is a material change in the nature or purpose of the business relationship, if you consider that you have insufficient CDD information, or if the information you hold is inconsistent with the customer's profile.


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If the customers are not existing customers of the reporting entity, but are existing customers of another reporting entity that has conducted CDD, then you may be able to rely on the CDD completed by that other reporting entity, if you meet the requirements of sections 32, 33 or 34 of the Act. You will still need to complete ongoing CDD. Once you have accepted a customer as your client you will have obtained all of the required information about the customer, including the nature and purpose of the business relationship.

Part of the nature and purpose of the business relationship extends to how much you will expect the customer to deposit with you, and how regularly. If the customer follows the given profile you do not need to conduct CDD for every deposit. However, it would be prudent to request more information from the customer if the customer's behaviour changes significantly.


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  5. If a trust is a discretionary trust and the beneficiaries are not named, how do we do CDD on beneficiaries? Assuming none of the beneficiaries is a beneficial owner of the trust, you only need to record a description of each class or type of beneficiary. You do not have to create a list of potential beneficiaries. Will you be providing a list of politically exposed persons PEPs?

    There are a lot of existing sources of information and services that provide PEP checks. We understand that some industry bodies are looking at linking into these for their members. Not on its own. This can only be used for KiwiSaver. Financial advisers cannot certify identity documents. The code of practice contains a list of trusted referees who can certify identity documents. A reporting entity does not have to comply with the provisions of a code of practice, but if they don't intend to comply they must notify their supervisor in writing in advance and must comply with the relevant obligation by an equally effective means.

    Alternatively, they may appoint a person as an agent to conduct CDD on their behalf in accordance with section Fax or pdf scanned copy of the trusted referee's signature will not be sufficient for the purposes of the code and cannot be accepted in place of the trusted referee's original certification. For practical reasons, reporting entities may start to set up a client's account based on a fax or scanned copy of certified documents, provided the originals are forwarded by post and are received before any transactions are undertaken. Alternatively, if a reporting entity chooses to rely on electronically certified documentation in accordance with the ETA, the reporting entity will need to ensure that the trusted referee's electronic signature reliably identifies the trusted referee and their approval of the original document.

    Reporting entities are not obliged to accept documents signed by an electronic signature unless they choose to do so. Yes, provided that the person is employed by at least one of the DBG members he or she administers and maintains all of the members' AML policies, as well as reporting to a senior manager of each reporting entity that appointed him.

    Is there protection from breach of privacy under the Act for people who submit STRs? Yes, section 44 of the Act protects anyone who properly reports a suspicious transaction to the Police Financial Intelligence Unit.

    Under the Act restrictions in the Privacy Act, legal professional privilege and other similar provisions do not extend to suspicious transactions. This is also the case under the Financial Transactions Reporting Act However, under section 41 of the Act, STRs must be signed by a person authorised by a reporting entity to sign them. STRs do not merely relate to transactions either completed or attempted.

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    The integral component of the STR is suspicion. It is therefore subjective and composed of many factors which may be relevant to include in an STR. These include the person sending or receiving the transaction; their behaviour; the time; the place; the amount; implausible sounding stories; the involvement of countries of interest; the transaction type; and the presence of recognised money laundering typologies. That will depend on when the financial activities of your business were first captured under section 5 of the Act or additional regulations. Consider the examples below:. This is to ensure that reporting entities have, and will continue to have, robust systems and processes in place to detect and deter money laundering and the financing of terrorism.

    The audit report will provide an opinion by the auditor at a point in time.

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    To support the opinion the auditor will examine evidence stretching back from the audit report date. Most likely, the period will cover the time between your last audit and your current audit. We do not have a list of recommended auditors. You should expect that your auditor has the required expertise of the Act and its regulations. Your audit will be more effective if your auditor understands your industry and has audit experience.

    It is imperative you are comfortable with the auditor you appoint as we may request you to provide evidence your auditor is appropriately qualified. The audit is an opportunity to identify those issues and correct them. If there are significant issues identified we encourage you to engage with us early to discuss the matter and to review the actions you propose to take.

    If we select you for a monitoring visit, we are likely to request a copy of your remediation plan and check your progress. In cases where significant issues are appropriately addressed, we are unlikely to engage further. If your business is still a reporting entity after two years from your last audit, then you must have it completed. If you are arranging for your clients to buy category 1 products then your New Zealand registered company is a reporting entity under the Act.

    The amount of products you sell is immaterial. It is also immaterial whether your clients are retail or wholesale clients.

    Compliance by role

    If you provide a purely advisory service to your clients and are not involved in the supply of category 1 products to your clients, then you will not be a reporting entity under the Act. If you have an agreement with a product provider to sell their category 1 products and you assist your client in the purchase by either providing an application form, helping the customer complete the form, collecting the identity information, or sending the form to the provider, then you are arranging the sale and will be a reporting entity under the Act.

    If you are selling category 1 products, your employer is likely to be a reporting entity under regulation 16 of the Anti-Money Laundering and Countering Financing of Terrorism Definitions Regulations If you are an individual who operates in your own name and not through a company or other unincorporated body, then you will not be a reporting entity under regulation Carbon credits are not treated as securities for the purposes of the Act.

    This means that trading carbon credits will not make you a reporting entity under paragraph vii of the definition of 'financial institution'. You could still be a reporting entity if you invest funds in carbon credits on behalf of others or if you manage an individual or collective portfolio of carbon credits. It is also important to distinguish between carbon credits and derivatives linked to carbon credits. I am an issuer of securities registered on the FSPR. You are not automatically a reporting entity just because you are registered on the FSPR. You will be a reporting entity if you issue debt securities in the ordinary course of your business or if you participate in securities issues and provide financial services in relation to those issues.

    Some issuers may, therefore, need to register on the FSPR even though they may not be reporting entities for Act purposes and conversely some entities may be reporting entities even though they are not required to register on the FSPR. To decide whether you are a reporting entity, you must decide whether you issue debt securities to the public in the ordinary course of business.

    The ' Interpreting ordinary course of business guideline ' can help. If you have a separate company or SPV in your group structure whose primary purpose is to issue retail debt securities, then issuing debt securities to the public would usually be in the ordinary course of business for that SPV.

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    If, however, the SPV has not issued debt securities for a significant period of time and has no intention to issue more, then you may decide the SPV does not issue debt securities to the public in the ordinary course of business. We cannot give definitive guidance on what 'a significant period of time' might be, because this will depend upon the nature of your business. A reporting entity, such as your SPV, must complete CDD on its customers, their beneficial owners and anyone acting on behalf of its customers.