Why is an Independent AML Audit Necessary

Why is an Independent AML Audit Necessary?

The AML/CFT legal framework is constantly changing and evolving. It necessitates a continuous check and assessment of the AML policies and procedures. An independent body (not involved in any AML routine compliances) must keep a tab on the AML policies and procedures and check their effectiveness in line with the AML rules and regulations. Further, even the AML laws specifically mention that designated institutions must get their AML compliance and framework periodically reviewed by an independent auditor.  

Thus, an independent AML audit is the need of an hour that can regularly monitor the relevance of the AML compliance programs and the effectiveness of their adoption in the organization.  

Please note that an AML audit is very much distinct from the regular statutory audit of the company’s books of accounts. In an AML audit, the company’s compliance policies and controls are reviewed, while in a traditional audit, books of accounts and the internal controls around business operations are verified. 

Key benefits of external AML audit

  • Though companies set up an in-house AML compliance department, they need to get an unbiased opinion on the efficacy of their AML policies, controls, and overall framework. Such an independent audit reveals the areas in which the AML department needs to work to make the compliance process more robust and ensure its adherence to the AML rules laid down by the government and independent international bodies such as the FATF.  
  • Independent audits are equipped to take prompt action – they can identify the risks plaguing the company’s AML compliance strategy. The audit will help understand the measures a business must adapt to mitigate the risks and analyze a gap between the existing controls and those recommended.  
  • Moreover, with independent audits, a business can keep pace with the changing landscape of the AML compliance framework. It can align its AML framework with the new requirements and prevent the risk of non-compliance while protecting the organization against the recent ML/FT typologies and trends.  
  • It is vital to evaluate the AML practices regularly to ensure quality assurance in the AML compliance process. So, regular independent audits can bring much-needed consistency and reliability in quality to the AML compliance program.  
  • Regularly conducted AML audits will help accurately assess and implement the remedial measures. The audit will also review the firm’s progress in adopting and implementing them to eliminate the AML policies and procedures discrepancies. 
Why is an Independent AML Audit Necessary

Elements of an Independent AML Audit

Objective Opinion

External AML audits are beneficial as they offer an unbiased opinion of the AML compliance program. The audit team comprises professionals with technical expertise and proficiency in AML compliance, so they are the right people to judge your AML compliance framework. Further, the audit would be independent of the routine AML compliances and process to share their fair observations. So, it would be best to get an independent audit to evaluate the AML policies and procedures and get professional guidance to make the AML compliance process more wholesome. With practical and effective recommendations, businesses can improve the efficiency of compliance operations and achieve full AML compliance, protecting the business from being exploited simultaneously.  

Goodwill

External audits also help earn goodwill in the market. Investors, stakeholders, and customers appreciate the business’s strict compliance approach. It helps build a good image which also attracts potential investors as they know that with the independent AML practice, they will not have to face any legal issues or non-compliance penalties. The firm can always be ahead of the curve with preventive measures. Timely action is possible with the help of independent audits. The audits will help identify shortcomings and prevent non-compliance. It helps to stay compliant with AML rules and regulations, ultimately helping to boost your reputation and goodwill in the market amongst various stakeholders

Collaboration

A collaborative approach is the best way to get effective results in AML compliance. It will help as the results be shared with the employees, increasing their awareness and understanding of the gaps in the AML compliance program. With the guidance obtained, the staff can streamline their compliance operations. An independent review of the existing AML policies and procedures and communication with the compliance officer will let the business know the effectiveness of the AML compliance measures adopted per the AML laws. The audit will outline the recommendations for streamlining the current AML framework to achieve full AML compliance.

The Right Resources

Different resources are involved in the AML compliance procedure. The right mix of human resources and technological support aids in a highly effective AML audit leading to accurate results. The audit team with expertise in AML regulations, experience and reliability in conducting independent AML audits, and support of the best AML software will enhance the effectiveness of the AML audit and deliver the best results. Today, businesses are extensively using AML software to support AML audits to get better results. It helps access, collect, and organize the data and dispense the information to the concerned stakeholders. It will ensure that your AML compliance framework is implemented cost-effectively with the best internationally accepted standards. 

Communication

Clear and regular feedback is necessary to effectively improve and implement the AML audit suggestions. Businesses need feedback – a highly efficient tool to achieve full AML compliance. The company should implement the feedback to accomplish the purpose of the AML audit. Two-way communication will help achieve the best results from the AML compliance program.

When Should the AML Audits be Conducted? 

The best AML audit practice is to conduct the audits annually, which will provide a comprehensive view of the AML practices, evaluation of AML training programs and the AML procedures, and policies being adopted by the organization. Moreover, the audit will help check if the latest guidelines are followed. Annual audits are recommended to learn about the potential revision the current AML framework requires. The audit will reveal if the business involves modification in the existing AML compliance program or needs a complete overhaul of the entire AML framework. The AML audit findings will help companies keep track of their compliance efforts and make the necessary changes the AML auditor reveals.  

It is noteworthy that all businesses do not require an annual audit as it depends on the nature and size of the company. Suppose the company is too large or deals in products or services that might be prone to financial crimes-related risks, such as money laundering or financing of terrorism. In that case, it becomes a prerequisite to have an AML audit conducted annually. It helps to adopt a proactive approach and keep the business safe from money laundering and vulnerable to misuse of funds or financial crimes.  

Businesses should conduct audits per the requirements, focusing on evaluating the weak areas in compliance, such as the KYC process or EDD. The audit might suggest aligning the existing AML policies and procedures with the new rules and regulations. There might be cases where businesses need support in identifying PEPs or UBOs. They might need assistance in AML training or require help with the proper software selection. The AML audit will reveal the effectiveness of all these elements in the AML compliance program and guidance on the correct procedure the business needs to adopt.

How can AML UAE Help? 

AML UAE is a renowned AML consultant in the UAE, offering unparalleled services to several businesses. We have a vast pool of resources with proficiency in the AML/CFT legal and statutory framework, which allows us to conduct AML compliance procedures efficiently. Contact us for the effective implementation of the AML regulations and compliance with AML obligations, including independent audits. Get expert AML consultancy services and stay 100% AML compliant. 

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About the Author

Jyoti Maheshwari

Chartered Accountant

Jyoti has over 5 years of hands-on experience in regulatory compliance, policymaking, risk management, technology consultancy, and implementation. She holds vast experience with Anti-Money Laundering rules and regulations and helps companies deploy adequate mitigation measures and comply with legal requirements. Jyoti has been instrumental in optimizing business processes, documenting business requirements, preparing FRD, BRD, and SRS, and implementing IT solutions.