Presentation by Bachir El Nakib at The International Conference on: Combating Money Laundering and Terrorist Financing"(AML/CFT) 27th – 28th of April 2011, Coral Beach Hotel, Beirut – Lebanon

1. Strengthening the inter-relationship between the
regulators and the financial institutions to mitigate
chance
h
of discrepancies
Bachir El Nakib
Head of Compliance / MLRO
Industrial and Commercial BankAl-Abed
Hussam of China , Doha (QFC) Branch
( )
1

2. Why regulate financial & non-financial sector?
• Financial Markets are large and important
• Financial stability is crucial to the well-being of a modern
economy
• Investors may need protection from the risks posed by complex
financial products
p
• Therefore…
Regulator = Trust

3. Regulator’s Vs Financial Sector main goals
 The main Regulator’s aim is to create successful circumstances for
the financial sector:
1. - efficient
- - profitable /
fit bl /good services
d i
- - more valuable money
- - extended access to affordable services
 √ R Regulated Firms have similar goals
l t d Fi h i il l
 √ This creates a strong shared interest, despite inevitable
 tensions.

4. Regulator – Regulation and Regulated Companies
• Regulation can be either friend or foe to the main operating company or
companies.
• Company and regulator have a common interest in the success of the
sector.
• The best basis for this is successful main operators are:
competitive/profitable/innovative.
competitive/profitable/innovative
• However the regulator needs to enable effective competition to develop.
• Successful resolution of this tension depends on an effective working
relationship.

5. Building an effective relationship between regulators and
regulated companies
Main elements:
- Active management (on both sides)
- Practical arrangements, e.g. interconnection
- Provision of full information
- Arrangements to ensure compliance
- Straightforward approach to enforcement

6. International Standards Key considerations Regulators
Vs Financial Sector
• MENAFATF Mutual Evaluation
• FATF HRJ Listings
g
(Feb 2010 – Feb 2011)
• Qatar Remediation Efforts
• MLRO Implementation
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7. MENAFATF Evaluations.docx

8. Background:
Undertake a self-assessment or gap analysis
• AML/CFT Self Assessment Template
– A tool to assist firms in determining the effectiveness of its AML/CFT
policies and procedures.
– Not a checklist, not a Yes/No exercise.
– Detailed description on how the firm meets the requirement is
expected
– Assess & document the firm AML/CFT & fraud prevention programme
against each core requirement
– A list of points that Firms should consider when assessing itself
against each requirement is provided
– Rate its level of compliance: High, Medium, Low
– AML Self Assessment.docx
Qatar Financial Centre Regulatory Authority 8

9. Qatar New AML/CFT Law (4) of 2010
Background:
g
1. Cooperation with IMF and NAMLC Workshop February-
March 2010 100125 Letter from FIU.pdf
p
M.Lesser.docx
1.
1 Qatar listed by FATF as HRJ on 18 February 2010 after
identification of deficiencies in Qatar’s previous AML/CFT
legal framework (2002)
2. The new Law (4) came to light 18 March 2010 to protect
Qatar from money laundering (ML) and the financing of
terrorism (FT)

10. Law No. 4 of 2010 on Anti- Money QFC Regulatory Authority AML /
Laundering and Combating the CFT Rules 2010
Financing of Terrorism
Qatar Central Bank Guidelines of 2010 on Qatar Financial Markets Guidelines of 2010
Anti
Anti- Money Laundering and Combating the on Anti- Money Laundering and Combating
y g g
Financing of Terrorism the Financing of Terrorism
• Aligned to Law No. 4 of 2010 on Anti- Money Laundering and
Combating the Financing of Terrorism
• Ensure optimum compliance with FATF Recommendations and
standards

11. Background to the new AML/CFT Rules
• close alignment with the FATF Recommendations and
standards through the use of key FATF terms and terminology;
• the rules set out a clear senior management responsibility for
AML/CFT responsibilities and the development of an AML/CFT
/ p p /
programme;
• more sophisticated risk-based approach to addressing firms AML/CFT
risks; and
• a single set of rules designed and structured to closely align
with how a firm would undertake the development and
implementation of an AML/CFT program and the ongoing
compliance with AML/CFT regulatory requirements.

12. Qatar New AML/CFT Law (4) of 2010
Background:
g
4. QFCRA New Rulebook published 30/04/2010, revised
01/10/2010
5. New framework in line with Financial Action Task Force
(FATF) international standards
6. In October 2010, the FATF publicly welcomed the significant progress
in improving the AML/ CFT regimes in Qatar and noted that its
jurisdictions met their commitments in their action plans regarding the
strategic AML/CFT deficiencies that the FATF had identified in
February 2010.(QNA)
FATF Public Statement & Imploving Global AML (1).doc

13. Overview of the AML/CFT Law
10 Sections
1. Definitions
2. ML and FT Offences
3. Disclosure system at customs
4. National Anti-Money Laundering Committee (NAMLC)
5. Qatar Financial Information Unit (QFIU) and Suspicious
Transaction Reporting (STR) System
6. Preventive Measures
7. Supervisory Authorities
8. Investigative Procedures and Provisional Measures
9. International Cooperation
10. Sanctions

14. Overview of the AML/CFT Law
Key Definitions include:
1. Proceeds of Crime - Any funds derived or obtained, directly
or indirectly, from one of the predicate crimes listed in
Article 2 (all felonies, international conventions, list of
proceeds generating crimes e.g. fraud, theft, smuggling )
2. Funds - Assets or properties of every kind
3. Money Laundering –
4. Financing of terrorism -
5. Financial Institution (FI)– 14 categories
6. Designated Non Financial Businesses & Professions (DNFBPs)
– real estate agents, jewelers, lawyers, accountants, trust
and company service providers

15. Key AML/CFT principles in Qatar
The 6 key AML/CFT principles cover the following areas:
Principle 1 – senior management responsibility;
Principle 2 – risk-based approach;
Principle 3 – know your customer;
Principle
p 4 – effective reporting;
p g
Principle 5 – high standard screening and appropriate
training; and
Principle 6 – evidence of compliance.

16. Principle 6– evidence of compliance
• Principle 6 (Rule 1.2.6) requires a firm to be able
to provide documentary evidence of its
compliance with the requirements of the AML/CFT
Law and the Rules.

17. “Dear CEO” letters
Compliance confirmation letters from Firms on or before September 15th
stating that the Firm has undertaken the following:
 Review of Policies, Procedures, Systems and Controls
 Development & implementation of the risk-based approach
 Review customers files
 Enhancement of AML/CFT compliance culture
 Training to relevant staff
 Independent Review of the AML framework
The letter should confirm whether or not the Firm is in compliance with the new
AML/CTF Rules 2010 of the QFC Regulatory Authority.
Areas of non-compliance + related remediation plan  to be shared with the
Regulatory Authority
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18. Who’s regulated by…..
FIU Regulator
Firm
Compliance Facing Customer
CEO Finance Officer
MLRO Function
F ti
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© 2010 Compliance Alert

19. Approved Individuals – Controlled Functions
Controlled Functions
 Executive & Non-Executive Governance Function
Non Executive Mandatory1
 Senior Executive Function Mandatory2
 Compliance Oversight Function Mandatory
 Money Laundering Reporting Function Mandatory3
 Finance Function y
Mandatory
 Risk Management Function Mandatory4
 Actuarial Function Mandatory5
 Senior Management Function
 Customer Facing Function Mandatory6
1 Mandatory for subsidiaries only
2 For subsidiaries the individual must be resident in Qatar
3 Must be resident in Qatar
4 Mandatory for Insurers only
y y
5 Mandatory for all Life Insurers and some General Insurers
6 Mandatory for firms conducting Investment Business and Insurance Mediation Business
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20. Authorisation Criteria – Approved Individuals
 Details of the firm’s assessment of the individual’s competence to perform the
proposed Controlled Function.
proposed Controlled Function
 Career history for last 7 years (preferably provided with a copy of the individual’s
CV) and explanations given for any gaps of longer than 6 months.
 Other regulatory registrations – past and present.
 Educational and professional qualifications that are relevant to the Controlled
Function to be carried out.
Function to be carried out
 Fitness and propriety questionnaire.
 In summary to be considered fit and proper individuals must have the relevant
In summary, to be considered fit and proper, individuals must have the relevant
background, experience, education and skills to carry out their proposed function
competently. Included in our assessment of skills is the individual’s personality and
character. This is particularly important for roles such as the Compliance Oversight
Function and Money Laundering Reporting Function.
Function and Money Laundering Reporting Function
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21. Enforcement remedies
• Impose or vary conditions restrictions etc on an Authorisation or
Impose or vary conditions, restrictions etc on an Authorisation or
Approval [FSR Art 31(2) (A)]
• Withdraw an Authorisation/Approval or remove a Regulated Activity from
a firm s Authorisation [Art 31(2)(C)]
a firm’s Authorisation [Art 31(2)(C)]
• Public censure [Art 58]
• Financial penalty [Art 59]
• Appointment of manager [Art 60]
i f [ 60]
• Enforceable undertakings [Art 61]
• Directions power – prohibitions and/or requirements [Art 62]
• Injunctive relief [Art 63/64]
Qatar Financial Centre 21
Regulatory Authority

22. Annual MLRO Reporting
•Division 2.3C of the AML/CFT Rules of 2010
Division
•What are the requirements?
•Reporting by MLRO to senior management
p g y g
•Minimum - annual reporting
•Must assess the adequacy and effectiveness of the
firms AML/CFT policies, procedures, systems and
controls in preventing ML/TF
•Rule 2.3.8(3)(a-k) prescriptive on the minimum
areas to report on
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23. Annual MLRO Reporting
• Consideration of the MLRO report
• What must senior management do?
• Consider each report made to it by the MLRO
p y
• If deficiencies are identified – approve an action plan to
remedy
• Reports must be given to senior management in sufficient
time to allow senior management to deal with the report
• Reporting cycle must be completed not later than 4
months after the firms financial year ends
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24. Annual MLRO Report Template.docx
l O l d
Adequacy and effectiveness - AML/CFTR 2.3.8 (2)
1. The report must assess the adequacy and effectiveness of the Firm’s AML/CFT policies, procedures, systems and
controls in preventing money laundering and terrorist financing.
The AML/CFT policies procedures systems and controls are:
policies, procedures,
Adequate Partially adequate Not adequate Not assessed yet
Comments: (How the adequacy assessment was conducted, areas of inadequacy…)
The AML/CFT policies, procedures, systems and controls are:
Effective Partially effective Not effective Not assessed yet
Comments: (How the effectiveness was assessed, areas of ineffectiveness…)
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25. Saudis form agency against money laundering and terror financing
(Gulf News 28.03.11)
• Riyadh: Saudi Justice Minister Dr Mohammad Al Essa issued a
decision on Saturday stipulating the establishment of a department
to combat money laundering and terror financing
financing.
• The creation of the new department comes within the framework of
the activation of the ministry's role for the execution of a money
laundering act issued eight years agoago.
• The decision coincides with the release of an international report
placing Saudi Arabia in an advanced ranking among the G20
countries in terms of fighting money laundering and terror financing
financing.

26. DFSA censures Saxo Bank Dubai Limited
• Administrative Censure Saxo Bank Dubai
Limited March 2011.pdf

27. UAE banks detect 479 laundering cases Q1 - 2011
• UAE banks detected 479 money laundering cases in the first quarter of
2011 and reported them to the concerned authorities and officials said
the high number indicated better surveillance and business upturn in
the country.
• Central bank figures showed the total suspicious money laundering and
terror funding cases stood at 572 in the first quarter of this year, most of
which were detected and report by the country's 23 national banks and 28
foreign units.
• The figures showed 68 cases were reported by money exchange shops and
the rest by insurance and other companies operating in the UAE.
• Speaking to reporters on Thursday, a senior anti-laundering official at the
central b k said a record hi h number of 2 711 l
t l bank id d high b f 2,711 laundering cases were
d i
reported in 2010, an increase of nearly 55 per cent of 2009, when they stood
at 1,750.
http://www.zawya.com/story.cfm/sidZAWYA20110423041759/UAE_Banks
ttp // a ya co /sto y c /s d 0 0 30 59/U a s_
Detect_479_Laundering_Cases

28. Qatar Financial Centre 2010 Decisions
On 05/05/2010 QFCRA imposes substantial Fine $506,000 on AL MAL
BANK (Qatar) and withdraw Licence, due:
(i) Failing to keep proper accounting records that were appropriate to its
business and that disclosed with reasonable accuracy its financial
y
position;
(ii) Failing to take adequate steps to ensure that its systems, resources,
p
procedures and controls were at all times appropriate to its business;
pp p ;
(iii) Failing to establish appropriate internal management and
organisational structures, policies and procedures;
(iv) Failing to maintain a register of members and other documentation
(iv) Failing to maintain a register of members and other documentation
required under the QFC Companies Regulations;
(v) Failing to establish an effective and independent compliance function;
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29. Qatar Financial Centre 2010 Decisions
05/05/2010 QFCRA imposes substantial Fine $506,000 on AL MAL
BANK (Qatar) and withdraw Licence, due:
(vi) Failing to establish and operate effectively internal reporting
mechanisms including arrangements to identify, measure, manage
and control regulatory risks;
and control regulatory risks;
(vii) Failing to maintain a Share Register or to issue Share Certificates for
each share allotted or transferred;
(viii) Failing to provide accurate information to the Regulatory Authority
( iii) F ili t id t i f ti t th R l t A th it
regarding its controllers;
(ix) Failing to ensure that the client funds were segregated from the Bank’s
own funds and by paying the client money into an account that was
f d db i th li t i t t th t
not disclosed in the books and records of the Bank; and
(x) Failing to ensure that its entire business operations were conducted in
accordance with Shari’a
© 2010 Compliance Alert 29

30. Is Too Much Compliance A Bad Thing?