Internal Audit: Your Shield Against Money Laundering, Financing of Terrorism and AML/CFT Penalties

16 August 2023

Navigating the intricate world of financial regulations can be a formidable challenge for professionals and businesses alike. Money laundering has seen a relentless surge, and regulatory bodies are grappling with this pervasive issue. As financial criminals adopt more sophisticated tactics, regulatory measures to combat financial crime, including money laundering and financing of terrorism, have undergone stringent reinforcement.

Shockingly, in the span of 2022, financial institutions were collectively slapped with hefty fines exceeding a staggering 4 billion euros for their failure to comply with AML (“Anti Money Laundering”) and CFT (“Combating the Financing of Terrorism”) regulations. The repercussions for non-compliance can be catastrophic, inflicting severe financial and reputational blows on any business.

Enter the internal auditors who have the tools that are necessary to vet and examine your business processes. Their analysis will help you determine how well prepared you are to shield your business from being exploited by sophisticated money laundering operations. It is only by being fully and constantly compliant that your business will avoid the dreaded AML/CFT penalties. Beyond that, it stands as a safeguard against the disruptive effects and reputational harm that can cripple even the most thriving operations.

But what precisely does an internal audit entail? How can you ensure that your internal audit is both effective and tailored to your business? Read on to discover more.

How Internal Audit Works

At the heart of every successful business lies a robust system of risk management, governance, and internal controls. Ensuring that these essential processes function flawlessly is where the art of internal audit truly shines. Operating as a vigilant watchdog, the internal audit team meticulously examines every facet of your business’s framework, leaving no stone unturned.

Carrying out regular internal audits is encouraged by organisations that fight financial crime, and also by the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR).

Things to Consider When Setting Up Your Internal Audit

Whether you’re outsourcing an internal audit service or assembling your internal audit dream team, there’s no room for compromise. Your chosen experts must possess an unmatched understanding of money laundering and AML/CFT regulations. Equally vital is their in-depth knowledge of your specific business and the industry it operates in. This synergy allows them to tailor the internal audit with surgical precision, aligning it seamlessly with your unique needs and objectives.

The beauty of an internal audit lies in its adaptability. You have the prerogative to narrow its focus on a high-risk area within your AML/CFT framework, or you can opt for a comprehensive review of the entire system—whatever best suits your business requirements.

The audit itself comprises two pivotal stages. Initially, it scrutinises the design of your existing framework, ensuring unwavering compliance with the rigorous AML/CFT regulations. This stage serves as the foundation, setting the stage for a seamless and successful audit process. Once the framework’s integrity is affirmed, the spotlight shifts to stage two, where the implementation of prescribed procedures is thoroughly assessed for effectiveness and efficiency.

Following the internal audit, the remediation process springs into action. While it’s not mandatory to involve the internal audit team in this phase, it is highly recommended. A partnership with the experts bolsters your company’s ability to address any shortcomings identified during the audit. Swift and precise implementation of recommended changes acts as a powerful shield against potential AML/CFT penalties that could otherwise loom over your business.

How AE Business Advisors Can Help

AE Business Advisors offers expert assistance in combating money laundering, the financing of terrorism, and financial crime through comprehensive internal audits and compliance services. With a deep understanding of AML/CFT regulations, the team meticulously assesses and optimises businesses’ risk management and internal control processes, ensuring compliance with stringent regulations like the PMLFTR and GDPR. Through regulatory and procedural audits, risk assessments, and supportive guidance, the internal audit team at AE Business Advisors are regularly engaged in counselling businesses and enhancing their resilience against the evolving threat posed by sophisticated money launderers.

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