Organisation Structure @ Banks for AML/CFT
An organizational structure describes how specific operations are directed to meet a company's objectives. Effective organizational structures clarify each employee's role and how it interacts with the rest of the system.
Decentralized systems provide practically every individual a high level of personal agency, whereas centralized structures have a defined chain of command. Organisational structure determines the role of each employee in a business hierarchy, task allocation, business procedures and reporting structure aligned to drive business outcome
Basic
Elements of Organizational Structure Design
An organizational structure is based on a range of elements, including:
- Work specialization
- Departmentation
- Chain of command
- Span of control
- Centralization/Decentralization
- Formalization
Organizational
structure is the backbone of all operating procedures and workflows at any
company. It determines each employee’s place and role in the business and is
key to organisational development.
At its core, OD encompasses a systematic approach to enhance
organizational effectiveness and health through planned processes, operations,
and culture strategies.
An example of OD can be found at Amazon, which has gained a competitive edge by investing in organizational development. It plans to invest $700 million in OD and retrain a third of its workforce by 2025, helping its workers transition into new, advanced roles by adapting to new technologies, working conditions, business procedures, and overall digital transformation
Organizational development is an evidence-based scientific approach
to help organizations become effective and adaptive to change by developing,
improving, and reinforcing strategies, structures, and processes.
Since OD aims at organizational effectiveness, the variable outcomes include financial performance, employee engagement, customer satisfaction, and overall change management
A clear structure
allows every team member to be involved. When employees know what they’re
responsible for and who they report to – which isn’t the case in many
fast-growing companies – they’re more likely to take ownership of their
work.
Having a
documented organizational structure in place enables employes to improve
efficiency and provides clarity for each individual employee and business unit.
With this clarity, departments can become more focused on how their actions and
goals drive business outcomes.
To build an organization structure, you need to consider your business size, life cycle, goals, and positioning. Apart from considering the current environment your company operates in, you should also think of where you want to see the organization in five years, a sign of organizatioanl health
Functional, divisional, flatarchy, and matrix
structures are examples of organizational structures.
Before determining which style of organization
is ideal for their company, senior leaders should consider several aspects,
including the company's goals, industry, and culture.
Functional
structure
It is often known as a bureaucratic
organizational structure, which divides a corporation into departments based on
the specialization of its employees.
Divisional or Multidivisional structure
This strategy structures a company's
leadership team based on the goods, projects, or subsidiaries it manages.
Structure of Flatarchy
It is a management style that flattens the
hierarchy and chain of command while giving employees a great deal of autonomy.
Structure of the Matrix
It's also the most confusing and underused.
Employees are matrixed across superiors, divisions, and departments under this
system.
Organisational structure and skillset for AML/CFT
To harness the power of data with analytics, FIs could begin establishing a robust structure and cultivate the necessary skillsets within their AML/CFT teams. Various FIs have adopted different structural setups, mainly characterised as decentralised, centralised or hybrid. In a decentralised structure, the AML/CFT analytics teams are set up within individual business units or departments (i.e., Commercial, Corporate, Retail). This allows teams to implement analytics solutions relevant to the business through deep understanding of unit operations, tailor risk assessments and provide accountability at the business level. However, challenges presented by such segregated teams include inconsistent methodologies, duplication of efforts, and difficulty in data aggregation across the FI.
A hybrid structure combines elements of both the centralised and decentralised approaches by having a central analytics team supported by specialist teams residing in the various business units. The central team is responsible for designing and implementing AML/CFT analytics solutions for the FI, ensuring consistent methodologies and processes. The specialist teams collaborate with the central team during the initial development stage. They are also responsible for the operation and maintenance of analytics solutions at the business unit level, leveraging on their unit-specific expertise to work with the central team to make timely adjustments for business requirements. The hybrid structure also offers flexibility in resource allocation and decision-making processes, capitalising on the benefits of both the centralised and decentralised structures.
However, the structure is highly reliant on collaboration between teams, requiring close coordination and communication to be effective. Industry Perspectives on Best Practices - Leveraging on Data Analytics and Machine Learning Methods for AML/CFT March 2024, Monetary Authority of Singapore(MAS) has given detailed analysis on this subject.
India
Purely
decentralised or centralised structures have not been commonly observed as the
disadvantages associated with each option could have undesirable impact on FIs
in the long run. Instead, most FIs choose to sit within the spectrum by
adopting a varying combination of both structures, i.e., hybrid.
Customised
models are used to suit the existing organization structure of the banks for
fulfilling the requirements under PMLA 2002.
Most
of the banks had centralized Customer Acceptance Procedure, consequent to the
implementation of Centralized Online Real-time Exchange (CORE) banking
solution. So the architecture for PMLA 2002 was adopted on to it.
Most of the banks have Front Office for KYC checking and reporting suspected customer behaviour based STR generation. Large banks have Zonal/Regional level examination of STRs and other reports and final aggregation at Corporate office either under Compliance Officer or Principal Officer as their internal controls needed.
Every one is concerned about internal audit, training and onboarding employees from the angle of AML/CFT
Some banks have separate Internatioanl Division under which the Correspondent Banking policy and related issues are handled.
Author has compiled the Organisation structure for AML/CFT by some of banks in India based on their AML/KYC Policy available from the internet resources. This does not mean that they are the best.
Bank of Maharashtra, Pune
Designated Director Bank has nominated the Executive Director as a Designated Director of the Bank, as required, to ensure overall compliance with the obligations under the Act and Rules. The Designated Director shall oversee the compliance position of AML norms in the Bank.
Principal Officer Bank has appointed General Manager, Inspection and Audit, Head office as a Principal Officer. The Principal Officer shall be independent and report directly to the Senior Management or to the Board of Directors.
Operational
aspects
a. Chief Operating Officer shall be head of Operation department and shall be responsible for monitoring KYC/ CKYC / R-KYC / V-KYC compliance at operational units, The role and responsibilities of the Chief Operating Officer include overseeing and ensuring overall compliance with regulatory guidelines on KYC/ CKYC / R-KYC / V-KYC issued from time to time and, rules and regulations made there under, as amended from time to time
b. Operation Department shall identify the parameters available in the system for risk categorization through the system as per the model suggested in the policy.
c. Operation Department shall review fixing of parameters available through the system half yearly from PMO Department.
d. Operation Department will review on risk categorization of all CIFs and accordingly generate the alerts through CBS for periodic updation of KYC (Re-KYC) to eligible customers and monitoring of the same in liaison with IT Department.
e. Operation department shall submit quarterly report to the Board/ ACB.
f. Operation department shall ensure the compliance of directions given by the Audit Committee of the Board.
g. Bank shall ensure that decision-making functions of determining compliance with KYC norms are not outsourced.
h. Operation Department shall follow up with the Zones & branches for identification & updation of Beneficial Owner (BO) in all eligible Legal Entity accounts.
Dept-wise support for AML/CFT @ Bank of Maharashtra:
|
Operations Dept |
Planning Dept |
Training & Information for Business
Development[TIBD] |
Project Management Office, IT Dept, HO |
AML Cell, Inspection & Audit, HO |
Branches |
|
Operatioanl
aspects of processing data and generating reports |
Issue
guidelines- Domestic |
|
Issue
guidelines-Foreign |
|
|
|
Existing
Customers |
|
|
|
|
New
Customers |
|
Laison
with IT Dept |
|
|
|
|
|
...
Planning Department: Issuance of guidelines pertaining to KYC/AML/CFT for
Domestic deposits for all deposit products through deposit policy and
implementation / monitoring of the same in liaison with IT Department.
Operations Department: Issuance of
guidelines pertaining to KYC/ CKYC / R-KYC / V-KYC and implementation thereon
for all existing and new accounts and monitoring of the same in liaison with IT
Department. Operations Department shall review and provide necessary
recommendations / directions to strengthen adherence of KYC/AML guidelines
TIBD: Issuance of guidelines pertaining to KYC/AML/CFT for Overseas deposits
and implementation / monitoring of the same in liaison with IT Department. vii.
PMO, IT Department, H.O
a.
IT Department shall identify the parameters available in the system for risk
categorization through the system as per the model suggested in the policy in
liaison with Operation Department
b.
PMO Shall review fixing of parameters available through the system half yearly.
c.
PMO Shall conduct risk categorizations of all CIFs in our CBS for the first
half of the financial year i.e. April to September shall be undertaken in
succeeding November and for second half of the financial year i.e. October to
March in succeeding May in every Financial Year in liaison with Operation
Department.
d.
IT may also apply additional alert indicators to address specific risks faced
and informed by AML Cell.
e. Add Update the UAPA List SDN List as and
when provided by the AML list and real time screening with list before and
applying stop, override in all matching cases.
viii.
AML cell, Inspection & Audit Department H.O. Verification of implementation
of AML/CFT guidelines including liaison with RBI/IBA/FIU/other agencies,
reporting to regulatory authorities and RBI apart from attending to STR, CTR,
NTR and CCR alerts.
The
AML cell take steps to identify and assess the Money Laundering / Terrorism
Financing risk for customers, as also for products / services / transactions /
delivery channels. Bank shall have controls and procedures in place to
effectively manage and mitigate the risk adopting a risk-based approach. As a
corollary, AML cell adopt enhanced measures for products, services and
customers with a medium or high-risk rating.
a.
Shall assess periodical AML/CFT and reporting to Top-Management / Board.
b. HO AML cell is responsible for scrutiny /
closure of STR alerts and submission of CTR / NTR / CBWTR / CCR / STR to
FIU-IND. Post-Closure scrutiny of closed alerts @5 % shall be undertaken by
officials in cadre SMG-IV or above,
c.
AML cell is also responsible for attending queries raised by FIU-IND,
Enforcement Directorate, and other Law Enforcement Agencies, and reporting to
Top-Management / Board,
d.
AML Cell shall attend correspondent banking questionnaires in liaison with TIBD
after duly vetted by Chief Compliance Officer of the Bank.
Roles and responsibilities of Inspection & Audit Department, HO
a.
Shall specifically check and verify the application of KYC procedures at the
branches and comment on the lapses observed in this regard.
b.
Concurrent / internal audit system to verify the compliance with KYC / AML
policies and procedures and submit quarterly audit notes and compliance to the
Audit Committee. At the end of every calendar quarter, implementation and
compliance of concurrent audit reports on adherence to KYC-AML guidelines at
branches would be reviewed for apprising Audit Committee of Board.
Roles and responsibilities of Zonal Offices
a.
Shall monitor / follow-up process of review / classification /
re-classification of Customer Risk Categorization.
b.
Zonal Manager shall be responsible for monitoring KYC / AML / CFT/ CKYC /
Re-KYC compliance at operational units, including overseeing and ensuring
overall compliance with regulatory guidelines on KYC / AML / CFT / CKYC /
Re-KYC in the Zone , abiding by the policy guidelines and govt rules and
regulations , as amended from time to time .
c.
Shall ensure implementation of KYC-AML guidelines by branches in letter and
spirit, has to be ensured by Zonal Managers / Deputy Zonal Managers and the
same is to be checked during their visit to branches.
d.
Shall attend / follow-up audit observations/remarks.
e.
Shall follow up with the branches and ensure compliance for identification of
Beneficial Owner in Legal Entity Accounts & Updation in CBS system.
xi.
Roles and responsibilities of Branches
a.
Wherever there is suspicion at branch level that customer is above low risk,
branches should carry out customer due diligence (CDD).
b.
Functionality for raising suspicious transactions at branch level has been
provided in ULC dropdown under the name of AML Offline Scenarios, where
branches can raise suspicion on selection of relevant RFIs (Red Flag
Indicators) and uploading KYC documents & AOF.
c. Suspicious transactions based on adverse
media reports & Law Enforcement Agency enquires, public complaints,
behavioural scenarios, attempted transactions etc. Shall be escalated to
Centralized AML Cell through AML offline Scenarios Module /email.
d.
While monitoring of transactions, branches shall arrive at a conclusion whether
the transaction is suspicious or not, based on objective parameters for
enhanced due diligence. Some of the objective parameters for enhanced due
diligence should be: - Customer locations - Financial status - Nature of
business - Purpose of transaction.
e.
Branches are responsible for ensuring compliances of KYC/AML/CFT guidelines in
letter and spirit.
f.
Branch shall ensure to identify beneficial owner in Legal Entity Accounts &
update the same in CBS System for all new as well as existing legal entity
accounts.
g.
Branch Manager shall be responsible for monitoring KYC / AML / CFT/ CKYC /
Re-KYC compliance at operational units, including overseeing and ensuring
overall compliance with regulatory guidelines on KYC / AML / CFT / CKYC / R-KYC
in the Branch , abiding by the policy guidelines and govt rules and regulations
, as amended from time to time .
h.
Branch shall ensure to complete CKYC and Re-KYC in all eligible accounts. It
shall be the duty of every bank branch, its Designated Director, officers and
employees to observe the procedure and manner of furnishing and reporting
information on transactions
Central Bank of India, Mumbai
This bank has not divulged the identity of its Dsignated director & Principal Officer like Bank Of Maharashtra has done.
Compliance of KYC policy: Ensuring compliance with KYC Policy through:
(i) Specifying as to who constitute Senior Management‘ for the purpose of KYC compliance. A Senior officer in the rank of General Manager will constitute as 'Senior Management for the purpose of KYC compliance.
(ii) Allocation of responsibility for effective implementation of policies and procedures. The Designated Nodal Officer at all Regional Offices and at all Zonal Offices are designated as Compliance Officers.
(iii) Independent evaluation of the compliance functions of Banks‘ policies and procedures, including legal and regulatory requirements by Compliance Dept, C O.
(iv) Concurrent / internal audit system to verify the compliance with KYC/ AML policies and procedures and submit quarterly audit notes and compliance to the Audit Committee.
(v) Concurrent / internal audit to
also ensure verification of compliance with KYC guidelines in system through
system generated reports. It shall be ensured that decision-making functions of
determining compliance with KYC norms are not outsourced.
The
STR alerts, based on scenarios, are generated through AML software (AML system).
A team of front line officers at AML-KYC Cell are screening the generated STR
alerts. After first level checking by a Senior Manager and second level checking
by Chief Manager, the suspicious alert shall be put up before the Principal
Officer for his approval to file an STR to FIU-IND by AML Cell, CO, uploaded electronically
on its FINnet site
If
the transactions / activity in the account where alert is generated is
apparently commensurate with the profile of the customer and /or on further
investigation, the transactions / activity appears to be genuine and no
suspicion is observed, MLRO will close the alerts. The first level Officer
(Senior Manager), second level Officer (Chief Manager) and Principal Officer
shall randomly check the alerts closed by MLRO to assess the quality of closure
and in case any suspicious activity is observed in the closed alerts on random
checking , the same shall be re-examined and STR be filed with FIU – INDIA.
In
case of exigencies the STR alerts will be decentralized to all theRegions
(presently 90) for screening.
Regional
Offices will designate officers as Money Laundering Reporting Officer (MLRO) for
scrutiny of STR alerts.The Chief Manager, looking after the functions of
Operations Department or Second officer in command at all the Regions is
designated as Compliance Officer‘ who is responsible for implementation of
instructions issued on KYC-AML. He shall also act as first level checker for the
screened STR alerts/referred probable STR cases by the designated MLROs at ROs
and forward the report to KYC-AML Cell, Central Office.
The Compliance Officer‘ at ROs will monitor the effective and authentic screening
of STR alerts and remarks put for closure of STR alerts
CSB Ltd, Trichur, Kerala State
It
has been decided by the Board of Directors that the MD & CEO shall be
designated as the Designated Director for KYC/AML/CFT compliance and the Head of the PMLA Cell will be designated as
the Principal Officer for KYC/AML/CFT compliance and shall report to the Chief
Compliance Officer.
Evaluation of KYC Guidelines by Internal Audit and Inspection System
Zonal
Offices should periodically monitor strict compliance to the laid down policies
and procedures at the branch level. An independent evaluation of KYC guidelines
for identifying High Value transactions would be required to be carried out by
Concurrent / Internal Auditors. They would be required to comment on the effectiveness
of measures taken by the branches / level of implementation of KYC guidelines
and prevention of money laundering at Branch / Office. PMLA Cell is subject to
an Internal Management Audit every year by the Inspection department of the
Bank. The audit team inspects the functioning of the department, effectiveness
of the KYC/AML system and procedures put in place and also point out any
shortcomings. This report is also placed to Audit Committee of the Board for
their approval. A Review of the compliance of KYC and AML and CFT guidelines of
the bank as a whole shall be put up by the PMLA Cell to the Board through the
Audit Committee of the Board [ACB] at monthly/quarterly intervals.
PMLA CELL [Prevention of Money Laundering Act Cell]
The
Bank is fully committed to establishing appropriate policies and procedures for
the prevention of money laundering and terrorist financing and ensuring their
effectiveness and compliance with all relevant legal and regulatory
requirements. To address this the Bank put in place a PMLA Cell for addressing
issues & obligations related to Know Your Customer/ Anti-Money Laundering /
Combating Financing of Terrorism guidelines ie; The Prevention of
Money-laundering Amendment Rules, 2009.
Activities of PMLA Cell
1. Study of International Best Practices and Codes on Anti - Money Laundering (AML) and Combating Financing of Terrorism (CFT).
2. Correspondence with Government of India and its agencies like Financial Intelligence Unit-India, and other Departments of RBI on AML /CFT related issues.
3. Review of guidelines issued to banks on ‘Know Your Customer (KYC)’ and ‘Anti Money Laundering (AML) / ’Combating of Financing of Terrorism (CFT)’
4. Preparation of briefs for top management for meetings with various organizations / authorities.
5. Taking up issues with AML implications such as money transfer services with concerned authorities/organizations/RBI departments.
6. The Cell will contribute material for the Management publications like Circulars/ Memos, guidelines, journals.
7. Taking follow-up action on points emanating from meetings of Board and Committees.
8. The Cell will also bring out every month/quarter a report on its important activities and submit the report to Board through the Audit Committee of the Board.
9. Issuance of Branch Circulars and Frequently Asked Questions and other publications for the benefit of staff members and others.
10. The Cell is also represented in various Committees, Working Groups, and Forums etc.
11. Imparting training to the staff members on Best Practices and Codes on Anti - Money Laundering (AML) and Combating Financing of Terrorism (CFT).
12. Advising officers on measures required to prevent and detect money laundering in the Branch/Office
13. Providing general or specific information to the Board.
14. Submission of Compliance Certificates on KYC /AML, Risk Profiling, STR / CTR/ CCR/CBWT/NTR Returns.
15. Follow up on
KYC Audit which forms the part of the Internal Inspection report of the branch
Punjab National Bank, Delhi
Internal Control System
i. At each Zonal Office, an Officer in the rank of Assistant General Manager / Chief Manager be designated as Nodal Officer for compliance of KYC Policy in all Circle Offices under its jurisdiction.
ii. Dy. Money Laundering Reporting Officer (DMLRO) cum Circle Compliance Officer (DMLRO cum CCO): At each Circle Office, an Officer, not below the rank of Chief Manager, shall be designated as DMLRO cum CCO, who would be responsible for compliance of KYC Policy in all the branches under the allotted Circle Office. He will prepare STRs pertaining to local adverse media reports, Law Enforcement Agency enquiries, public complaints, behavioral scenarios, attempted transactions etc. in all the branches under allotted Circle Office and will send STRs to Centralized AML Cell. Similarly, if during execution of his duties, DMLRO cum CCO observes any money laundering activity at BO/CO, he will escalate the same to Centralized AML Cell.
DMLRO-cum-CCO to ensure that field functionaries are sensitized on KYC / AML guidelines and ensure that no money laundering activities take place in the branches under his/her jurisdiction. For this purpose he/she should also ensure on-site supervision by visiting the branches under his/her jurisdiction for random checking of compliance of KYC / AML guidelines of the Bank.
iii. Centralized AML Cell: Monitoring, analysis & closure of AML alerts, including Trade Based Money Laundering (TBML) alerts, shall be done at Centralized AML Cell on day to day basis. Makers/ Checkers at Centralized AML Cell will analyze alerts pertaining to their respective assigned Zones / Circles on day to day basis and will close the alerts after thorough analysis of the transactions / alerts and ensuring that all the transactions are genuine in nature & match with the business profile of customers. Post-closure scrutiny of closed alerts (@20%) shall be undertaken at Centralized AML Cell by officers upto Scale-III. Further, Chief Managers at Centralized AML Cell will also review / scrutinize atleast 5% of the closed alerts, pertaining to their respective assigned Zones / Circles, on sample basis. They will also ensure that necessary corrective steps are initiated for the discrepancies observed during sample checking. STRs on all suspicious transactions shall be put up to Principal Officer immediately for approval and onward submission to FIU-IND. Similarly, STRs on adverse media reports, Law Enforcement Agency enquiries etc. shall also be prepared and put up to Principal Officer. During analysis of alerts, special attention shall be given to alerts pertaining to TBML, High Risk Customers, Politically Exposed Persons & High Value Transactions.
iv. Incumbent Incharge of branches will allocate duties and responsibilities for opening of accounts through an Office Order to the staff members. Senior Officers from the Zonal / Circle Offices, during their visits to the branches will ensure that KYC / AML guidelines are being strictly adhered to as per the laid down procedures, keeping in view the risk involved in a transaction, account or banking/business relationship.
v. For discharging the responsibilities effectively, the Principal Officer and other appropriate staff should have timely access to Customer Identification Data and other Customer Due Diligence information, transaction records and other relevant information.
Source: KYC Policy of respective banks as available from internet sources
Happy reading,
Those who read this, also read:
1. IBA WGR 2010 on AML/CFT 2010: Alert Management
2.Reports by RE under RBI: PMLA2002
3.Financial Intelligence Unit(FIU-Ind)
4.Obligations of RE under Sec 12 , PMLA 2002
5. AML/CFT: Organisation Structure @ India
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