Earlier this week I was approached by a client with whom we had completed a full overhaul of their Risk Assessment documentation, which occurred about 3-4 months ago. The project was completed with excellent results, and from all accounts, an ideal outcome. Mainly, the client was satisfied with the deliverable, felt more confident in the status of their overall compliance program, and was a delight to work with.
When they reached out this week, they were inquiring about Outlier completing their upcoming 2 year Compliance Effectiveness Review (CER). This was a clear indication of their satisfaction, which was a good feeling. However, we had to keep in mind that we (Outlier) revised their Risk Assessment documentation not too long ago. After some internal discussion, we felt it was not the right move for us to take on their CER, as we would be reviewing a portion of our own work. Not only would this be less value to the client, but should their financial service provider or FINTRAC determine that their reviewer was also the drafter of a portion of the compliance documentation, that would be a bad look. FINTRAC guidance states “Also, as a best practice, to ensure that your review is impartial, it should not be conducted by someone who is directly involved in your compliance program activities.”
Informing the client about our perceived conflict, and that it would not be the right move given the situation, felt less than optimal. No one wants to turn business away. However, the response was received with grace and understanding. This isn’t a shock as this individual is, in my opinion, an underrated pillar of the AML community, and generally, a person with a high degree of integrity.
Ok, So What?
This post is not intended to be a self-congratulatory post, but rather a message to highlight an important point for reporting entities. We have sat through examinations with clients where FINTRAC has identified the lack of separation between the drafter of the documentation and reviewer of the documentation. This situation left the reporting entity in a position they could not defend, resulting in, what I deem, an entirely unnecessary position. Had the reviewer acted with integrity, by informing the reporting entity about the potential risk and downfalls, the FINTRAC examination would have resulted in a more favorable outcome, including one less deficiency.
From my experience, the separation between the drafter and reviewer should go beyond merely assigning different people, or different departments, within the same organization because the baseline knowledge is consistent across the business. You want completely fresh eyes on your compliance program and its effectiveness.
The intent of this post is to serve as an FYI to reporting entities that relying on one firm to handle all aspects of compliance support is not an ideal scenario and can lead to problems down the line. There is no shortage of fantastic compliance consulting firms in Canada, each with deep expertise when it comes to Canadian regulatory requirements and FINTRAC expectations. If you would like some suggestions on additional firms that can offer compliance support, please feel free to reach out to us, and we can make warm introductions to other trusted firms.
Finally, this also raises concerns regarding independence of the CER process when the same company is engaged for multiple reviews in succession. We have strongly suggested to a few longstanding clients that they source a different reviewer for a “fresh set of eyes,” after completing multiple CERs for them previously. We have also received feedback from clients that during FINTRAC exams, FINTRAC examiners are suggesting the same thing. While its nice to have a good relationship with your compliance support providers, there comes a point where a changeup is not only suggested, it is necessary. It’s better to make the choice yourself, rather than have FINTRAC make it for you.
Independent Support
If you are in need of a completely independent reviewer, a suggestion for a couple of different options, or just have general questions, please feel free to contact us. We are here to help, and truly believe that rising tides lift all boats.