Why an Outsider is Required to Perform the Annual Compliance Audit
The annual compliance audit, as an important part of the anti-money laundering (AML) program, is an annual event that must be performed in financial firms. The reason for the annual compliance audit is to ensure that every measure possible is being taken to be in compliance with the AML policies and procedures. These policies and procedures, when followed to the letter, will help to guarantee the safety of our financial institutions, prevent money laundering, possible terrorist action, or terrorist financing.
If you've ever gone to a bank to open a new account and were bombarded with questions and requests for what seemed like a dozen forms of identification, now you know why. The employees were being in compliance with the AML policies and procedures, which is one of many things that are checked as part of the annual compliance audit. So, next time this happens to you, be grateful they're doing their job and ensuring your safety and the safety of your money.
Who Must Perform the Annual Compliance Audit?
The annual compliance audit must be performed by an independent third party or someone that is not directly dealing with the bank's transactions. This is often a firm trained and licensed to perform an annual compliance audit. Although a member of the firm who doesn't hold any customer accounts with the bank or handle customer transactions can perform the annual compliance audit, most firms are realizing the importance of hiring an outside firm to do the annual compliance audit.
Hiring an outside firm to come in and perform the annual compliance audit may be an expense that many firms would like to avoid. However, it is a very wise investment. Not only will it eliminate any chance of mistakes or discrepancies, it will also save the firm time, which will save them money as well.
The results of the annual compliance audit are very important to the future and security of the financial firm, which is why hiring an outside firm is your best choice, and one of the wisest investments a bank or firm can make.
What's on the Annual Compliance Audit?
Although the annual compliance audit has been around for a while, the rules and guidelines have become more stringent since the tragic events on 9/11. A documented report on the findings of the annual compliance audit is given to the senior member of the firm or bank. The annual compliance audit entails a very strict set of guidelines that must be followed, which include the following.
- How the firm deals with document retention
- How Money transfers are done
- How bank activity is monitored
- How suspicious activity is handled and reported
- Procedure behind account openings
- How red flag issues are handled
- How customer identification is handled
- If the firm is in compliance with the USA Patriot Act, OFAC and Section 32 requirements, FINRA Rule 3011, FinCEN 314a requests and FinCEN Section 311 notifications.
