Tribune by Taoufik Baccar* / Compliance: certification at the service of financial institutions

In this forum, Taoufik Baccar, former Minister of Finance of Tunisia, also former Governor of the Central Bank of Tunisia, explains the importance of compliance for financial institutions.

Everyone is aware of the growing interest given today to compliance, particularly in the banking and financial sector. This consists, it should be remembered, in the implementation of a strategy aimed at the adoption of a compliance and risk management program that ensures the transparency of organizations and the adoption of ethical conduct. ; this strategy must also incorporate good corporate governance practices, which cover “the set of processes by which companies are managed in order to protect organizations against financial fraud, corruption, money laundering and the behavior and /or the misconduct of employees related to them, thereby avoiding possible damage to their good reputation and financial strength. It is a tool whose purpose is to establish rules, standards and guidelines for internal processes within organizations.

The most current illustration of compliance lies in the fight against money laundering and the financing of terrorism. These offenses have been dealt with by the international financial community, in particular through the standard of the Financial Action Task Force (FATF), introduced into the local law of the countries in the form of laws and regulations of a binding nature.
The originality of the FATF standard lies in the fact that it associates the financial sector in the fight effort by requiring it to put in place a complete system which makes it possible to detect suspicious transactions and report them to the competent authorities (knowledge of customers, preservation of documents, etc.).
The balance sheet since the 90s until today remains, however, not very flattering.
With regard to the financial sector in Africa, the shortcomings relate in particular to (i) the absence of a global and strategic vision due to the lack of sectoral assessments of BA/FT risks, (ii) the poor understanding of risks by the authorities of control and the private sector, (iii) the lack of technical compliance with standards as well as the lack of efficiency and (iv) the weakness of internal control mechanisms.
In particular, according to these reports, the banking sector has a fairly limited understanding of ML/FT risks.
With regard to declarative activity, although most suspicious transaction reports (STRs) continue to come from banks, the number of STRs remains below what is possible.
The improvements noted in terms of the technical compliance of internal systems contrast sharply with the virtual absence of effectiveness of said systems.
The risks induced by the lack of effectiveness are of great importance because they expose the countries concerned and their financial institutions to extremely severe sanctions, the first through their inclusion on the FATF list dedicated to jurisdictions whose AML/CFT system presents strategic shortcomings and the latter through the sanctions imposed by the supervisory authorities and the termination or threat of termination of correspondent banking relationships.
The huge scandal that recently rocked Danske Bank has put the spotlight on the inadequacies of control linked to money laundering. A problem that is not specific to the Danish bank but affects the entire European banking sector, at different scales. Thus, 18 of the 20 largest European banks, or 90% of them, have already been sanctioned for breaches of anti-money laundering systems, according to a study by the British company Fortytwo Data.

The upgrading of national AML/CFT systems is urgent, in order to adhere more resolutely to the efforts of the international community, which has become very active in the field, and thus contribute positively to the promotion of the values ​​of integrity and transparency of the financial system.
The experience of Tunisia in this regard is very instructive. Listed in 2017/2018 in the FATF Public Statement, the country has managed to fill the gaps in its national system and significantly improve its ratings. The private sector has also worked to bring financial institutions up to speed on this chapter, in particular through the AML 30000 initiative. AML/CFT adopted by financial institutions and non-financial businesses and professions designated by the FATF. The exercise requires an exhaustive audit of the internal system and follow-up audits within the framework of a renewable three-year cycle and is based on the requirements of the FATF standard and others which are of an operational nature, in order to assess the effectiveness of internal AML/FT measures.
This mechanism was tested in Tunisia and gave excellent results before being exported to the continent, to the DRC, then to Côte d’Ivoire, knowing that other countries or institutions on the continent have also shown great interest in this mechanism. In some cases, the certification is preceded by an upgrading program in order to increase the chances of the institutions concerned to be certified.
Our experience of more than twenty years in the field of AML / CFT leads us to believe that the private sector can play a fundamental role in the fight against this scourge through its contribution to the upgrading of financial institutions and the opening of the possibility for the latter to be certified under the AML 30000 standard.

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