The treasurer’s role : ensuring payments are compliant
You’re a treasurer in a Group with an extended geographic reach, including countries considered “sensitive” in the geopolitical context. As the last link in the bank transmission chain, your role is essential in the process of confirming that payments are compliant. Since your Group’s upper management can face criminal sanctions if the regulations are violated, they’re counting on your business expertise as a “non-compliance detector”. You’re also the front-line contact for any bank that has questions about a transaction and may ask you to document it.
Knowing your customers before doing business with them, and stopping any payment you believe to be non-compliant before it reaches the bank: Doing these jobs right not only protects the company’s positive image and its legal and financial security, but ensures you won’t end up doing business with “crooks”.
At the centre of a network of transactions for natural and legal persons, each potentially associated with a particular level of risk, the Treasurer can anticipate non-compliance in financial flows. Let’s take a closer look !
- Your external compliance: respecting regulations on embargoes and frozen assets
French anti-corruption laws have expanded dramatically over the past few years, between the Sapin II law on the one hand– now extended to all companies with over 500 employees and earning over 100 million euros in annual revenue – and the fight against money laundering and the financing of terrorism (AML/CFT) on the other. (Order no. 2016-1635 of 1 December 2016)
Businesses operating internationally must be especially vigilant about national laws and regulations, and also follow rules on extraterritorial application.
In France, TRACFIN (the French unit for the fight against money laundering and the financing of terrorism) gathers information in a centralised location and collects suspicious transaction reports issued by financial professionals to enrich its database. At a press conference last November, Tracfin director Bruno Dalles emphasised “the importance of remaining highly vigilant against the financing of terrorism.” In the most recent report analysing the risks of money laundering and the financing of terrorism, Tracfin states that it processed 1379 reports of suspected terrorist financing activity in 2017, a 17% increase over 2016.
These reports are confidential, and are issued by banking institutions with the obligation and the ability to continuously monitor businesses’ banking communications. Needless to say, any case in which a bank blocks a payment flow reveals a risky situation that may expose the business and its executives to criminal liability.
Besides the risk of such liability, no business wants to be unknowingly involved in money-laundering operations or the financing of terrorism.
It is therefore essential to monitor all payments and receipts to ensure that all of your business and financial flows are compliant.
- Do you know your customer?
Originating in the United States, the “Know Your Customer” process is used by companies around the world to ensure that their customers are in compliance with anti-corruption laws, and to verify their probity and integrity. The goal is to prevent identity theft, financial fraud, money laundering and financing of terrorism.
These processes involve collecting and analysing data, checking for presence on lists (e.g. a list of politically exposed persons), analysing transaction behaviour, etc.
On 1 October 2018, the Decree of 18 April 2018 entered into force, strengthening the French framework for the fight against money laundering and the financing of terrorism through increased knowledge of customers. In France, compliance services are incurring ever-increasing financial and staffing costs. The idea of pooling KYC, fraud, and AML incident information to be accessible to all banks, to FinTech and to insurers is gaining acceptance as a way to reduce costs and share information. For its part, SWIFT offers the KYC REGISTRY, allowing financial institutions to exchange Know Your Customer information simply and securely, and thus to improve transparency while eliminating expensive and unnecessary document exchanges.
- Geopolitical influences on your banking communications
The SWIFTnet network, originally used exclusively by banks, now offers its services to businesses, which can use it to communicate with all banks on the network and improve security through authentication of the issuing customer. Different countries’ political regulations play a role here; for example, the most recent round of American sanctions in November 2018, aimed at cutting Iran off from the international SWIFT banking network, were welcomed by the Israeli prime minister as “a historic day”. This is a perfect example of the geopolitical dimension that goes beyond simply knowing the end customer.
The very cautious interpretation used by banks with regard to embargoes and international sanctions seeks to comply with the law and minimise risks. However, it must not become a limiting factor for the commercial development of French companies.
Based on all their investigations and information-gathering efforts, treasurers will ultimately determine the impact of taking legal and financial risks. It is they who will decide whether or not to open a customer’s account, or whether or not to continue working with a suspect economic operator.
These checks carried out before accepting a new partner into the company’s ecosystem require a system of regulatory monitoring to be put in place, and real-time updates to reference databases (embargoes, new laws or legal restrictions, lists of high-ri
- The difficult task of updating lists of sanctions:
While checks on countries and currencies are relatively simple, the process can be much more complex when it comes to the natural or legal persons subject to sanctions. Companies need to work with updated lists, not purchased lists that quickly become obsolete.
Monitoring financial flows can be a slow and tedious process if done manually, especially if there is a large volume of data to be processed over a multi-country, multi-currency, multi-third-party structure.
The only way to ensure valid results is through real-time indexation to a multi-source database.
- To ensure that their payments are compliant, any treasurer working in 2019 must be able to answer “yes” to these 4 questions:
- Am I sure that my banking flows do not involve sanctioned individuals recently added to “blacklists” of whom I was previously unaware?
- Am I able to aggregate different types of lists with different format structures? (e.g. lists from the US Treasury and those from the EU Commission)
- Is it possible to archive these blacklists in order to show the lists that were active at the time of the transaction in case of an audit?
- Is my evaluation of the risk of my payments calculated with a score based on data with multiple criteria? Do I have a clear overview of my exposure to risk?
The Thétys “compliance” module developed by ACA lets you automate these aspects of risk monitoring with:
- Access to lists of sanctions that are always up to date
The module is automatically updated with public lists of sanctions and asset freezes (FR, EU, UN, US)
- Checks and verifications
You set the alert levels, you evaluate the risk of each operation depending on the payee’s country and the transfer currency. You set up your own internal scoring based on the lists of sanctions
- Real-time alerts of non-compliance risks:
An alert is emailed to the treasurer in real time: payments are blocked until they are verified and authorised – or not – by the treasurer.
The system allows you to manage “false positives”, e.g. by listing third parties in a “whitelist” that should not generate a new alert the next time they are involved in a flow.
- Managing your risk exposure
Edit and view your dashboards in real time to get an overview of your exposure.
Looking to manage the risks associated with your Group’s payments? With the compliance module, deploying an effective surveillance programme is simple.
Contact us to set up an appointment !
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