AML Internal Audit
1. Planning and Preparation
2. Documentation Review
- Identify relevant regulations and guidelines.
- Ensure policies align with regulatory requirements.
- Check for updates in policies and procedures.
- Evaluate the effectiveness of implementation.
- Document any gaps or areas for improvement.
- Verify the adequacy of CDD and EDD procedures.
- Assess risk assessment methodologies used.
- Evaluate documentation of customer identity verification.
- Check for consistency in application across customers.
- Identify any exceptions and their justifications.
- Review system configuration and parameters set.
- Evaluate the effectiveness of alerts generated.
- Check for integration with other compliance systems.
- Assess data accuracy and reporting capabilities.
- Identify any system enhancements needed.
- Review SAR filing procedures and timelines.
- Assess documentation supporting each SAR.
- Evaluate the follow-up actions taken on SARs.
- Check for trends or patterns in SARs filed.
- Identify any training needs based on SAR findings.
- Assess the content of training materials for relevance.
- Check for compliance with regulatory training requirements.
- Verify attendance records for all relevant staff.
- Evaluate the frequency of training sessions.
- Identify gaps in training coverage or effectiveness.
- Ensure all sections are filled out.
- Confirm data is current and relevant.
- Cross-reference with risk assessment methodologies.
- Check for signatures or approvals from responsible parties.
- Look for any updates or revisions made.
- Review the scope and objectives of the audit.
- Evaluate the independence of the audit team.
- Check the implementation status of recommendations.
- Analyze follow-up actions taken by management.
- Determine if reports are timely and comprehensive.
- Verify the audit schedule and frequency.
- Ensure audits cover all relevant AML processes.
- Check for documented findings and action plans.
- Assess the qualifications of the audit team.
- Review management's responses to audit findings.
- Confirm the criteria used for identifying high-risk customers.
- Review transaction monitoring reports for accuracy.
- Check for documentation of alerts and investigations.
- Ensure there are records of due diligence conducted.
- Assess the frequency and thoroughness of reviews.
- Review the reporting channels and procedures.
- Check for training provided to staff on reporting.
- Ensure there are clear guidelines for escalation.
- Assess the timeliness of reported activities.
- Verify documentation of all reported cases.
- Check for records of all communications with regulators.
- Ensure documentation includes responses and follow-ups.
- Assess how communications are tracked and managed.
- Verify the accuracy of information shared.
- Look for evidence of compliance with regulatory requirements.
- Review all regulatory findings for completeness.
- Check the organization’s responses and corrective actions.
- Ensure timelines for addressing findings are documented.
- Evaluate the effectiveness of implemented changes.
- Confirm follow-up audits or reviews were conducted.
- Verify policies align with regulatory requirements.
- Ensure procedures are clearly documented.
- Check for training materials related to these policies.
- Assess the implementation of identification procedures.
- Review any updates or amendments made to policies.
- Review documentation of software selection process.
- Check for user training and support records.
- Assess effectiveness through performance metrics.
- Verify integration with existing AML processes.
- Ensure documentation is current and reflects usage.
- Review the internal control framework documentation.
- Ensure risk mitigation strategies are clearly defined.
- Check for regular updates to the controls.
- Assess the effectiveness of controls through testing.
- Confirm documentation includes roles and responsibilities.
3. Testing of Controls
- Review sample customer files for completeness.
- Check for proper documentation of identity verification.
- Assess adherence to KYC policies and procedures.
- Evaluate the frequency of KYC updates.
- Test for compliance with relevant regulations.
- Examine system parameters and thresholds for alerts.
- Review a sample of flagged transactions for accuracy.
- Test the system's ability to detect unusual patterns.
- Evaluate the effectiveness of alerts generated.
- Assess user training on system functionalities.
- Review risk assessment methodologies used.
- Test a sample of customer risk ratings for accuracy.
- Evaluate the consistency of risk classification.
- Assess documentation supporting risk decisions.
- Check for updates based on changes in customer behavior.
- Review the reporting procedure documentation.
- Test a sample of reported cases for compliance.
- Assess timeliness of escalations to relevant authorities.
- Evaluate the training provided on reporting mechanisms.
- Check for follow-up actions on reported activities.
- Review internal policies for alignment with regulations.
- Sample transactions to test adherence to legal requirements.
- Evaluate employee training records on compliance.
- Assess audit trails for documentation of compliance.
- Check for regular updates to policies based on regulatory changes.
- Collect training materials and schedules.
- Verify the frequency of training sessions.
- Assess employee attendance records.
- Gather feedback from employees on training effectiveness.
- Check for updates reflecting recent regulatory changes.
- Review the criteria used for sanctions screening.
- Test the accuracy of sanctions list updates.
- Evaluate the frequency of screening processes.
- Analyze false positive rates and handling procedures.
- Confirm adherence to regulatory requirements.
- Review risk assessment processes for high-risk customers.
- Check the frequency of due diligence reviews.
- Assess the documentation of risk factors.
- Evaluate follow-up actions taken on identified risks.
- Confirm compliance with regulatory expectations.
- Review documentation procedures for AML activities.
- Ensure records are maintained for required retention periods.
- Assess the completeness and accuracy of records.
- Check access controls to sensitive documents.
- Evaluate the process for record retrieval.
- Review patterns of flagged transactions.
- Assess the timeliness of follow-up actions.
- Evaluate the criteria for flagging accounts.
- Document the outcomes of investigations.
- Ensure compliance with internal policies.
- Assess the functionality of automated systems.
- Evaluate integration with existing processes.
- Test system outputs for accuracy.
- Review user access controls and permissions.
- Confirm regular system updates and maintenance.
- Review due diligence processes for third parties.
- Assess ongoing monitoring mechanisms.
- Evaluate documentation of compliance checks.
- Check for risk assessments of third-party relationships.
- Confirm adherence to contractual obligations.
- Review exception handling procedures.
- Assess documentation of exceptions.
- Evaluate the process for reporting exceptions.
- Check for follow-up actions taken on exceptions.
- Confirm compliance with established guidelines.
- Review data analytics tools and methodologies.
- Evaluate the accuracy of analytics results.
- Assess the frequency of analytics reviews.
- Document outcomes of identified cases.
- Confirm alignment with regulatory standards.
- Verify the completeness of transaction logs.
- Assess the accessibility of audit trails.
- Evaluate time-stamping and user identification.
- Check compliance with retention policies.
- Confirm that audit trails are regularly reviewed.
4. Interviews and Observations
5. Reporting Findings
- Use clear, unambiguous language.
- Include relevant details and context.
- Organize findings by category.
- Ensure consistency in formatting.
- Use bullet points for clarity.
- Define criteria for risk classification.
- Assess the impact of each finding.
- Consider likelihood of occurrence.
- Use a standardized risk matrix.
- Document the rationale for classifications.
- Ensure recommendations are practical.
- Align suggestions with findings.
- Prioritize based on risk level.
- Include timelines for implementation.
- Suggest responsible parties for actions.
- Compile findings, classifications, and recommendations.
- Format the report for readability.
- Schedule a review meeting with management.
- Incorporate feedback from management.
- Ensure all key points are addressed.
- Incorporate final edits and corrections.
- Ensure all stakeholders' inputs are considered.
- Format the report for distribution.
- Identify key stakeholders and their contact details.
- Send the report via appropriate channels.
Use in Manifestly