Barely a month since the last sanction was published, the ACPR has this time condemned a non-life mutual/insurance company, mainly for failings in the detection of asset freezes.
Apart from the monetary fine and the non-anonymization of the penalty (which is becoming systematic!), the key points are:
- Even if a taxpayer only makes "Non-Life" products (therefore considered less risky at AML-CFT), he must meet his obligations!
- The ACPR commission does not hesitate to refer to previous sanctions, which set precedent and clarify the measures to be taken AML-CFT .
- The ACPR commission also takes the opportunity to remind us of a few rudiments for detecting asset freezesthe organizations subject to the law :
- have an obligation of result,
- must immediately and exhaustively identify customers or beneficiaries of transactions subject to restrictive measures,
- must inform the Direction Générale du Trésor (DGT) without delay,
- must instantly block the business relationship and/or operations of designated persons and organizations.
Let's take a closer look at the " particularly serious " criticisms levelled by the ACPR against this mutual/insurance company.
Defects in the system for detecting persons subject to a freezing order and transactions for the benefit of designated persons or entities
Exact search/Versus Fuzzy Logic
Screening must absolutely be carried out by a "fuzzy logic" detection engine (orthographic approximation) and not simply by "exact match".
Previously, the ACPR had already sanctioned a registrar for performing a search with an approximation of 99%. It's hardly surprising, then, that in this case, where the registrar performed a detection with exact spelling correspondence (also known as " exact match " or " strict matching "), the ACPR should censure him.
AP Solutions IO's opinion: It is essential to carry out searches with orthographic approximation. In general, the tolerance threshold for Sanctions and Asset Freezes remains low, which increases the number of alerts. In the case of Politically Exposed Persons (PEPs), their close relations (RCAs) and/or Persons with a Bad Reputation (Adverse Media), the thresholds can be increased (but without reaching "strict matching" or simili) in order to limit the number of alerts.
As a reminder, in terms of AML-CFT, the regulated professions have obligations to achieve results in terms of detecting persons under sanction and/or asset freeze. Whereas they have obligations of means concerning the detection of PEP, RCA, AME,...
Reduce false alerts
ACPR points out that alerts were automatically dismissed if the gender of the listed entity was not mentioned in the official lists. This represents around 50% of listed entities!
AP Solutions IO's opinion:Reduction engines with Augmented Intelligence are needed to restrict the generation of alerts so as to retain only the most relevant ones. This reduction should not be applied if data quality on the customer or listed entity side is not sufficient.
Finally, this reduction must be fully traceable and, above all, explainable, to avoid a "black box" effect that is incomprehensible to users... or a regulator!
Failure to comply with the obligation to implement asset freeze measures without delay and to report to the DGT
The ACPR reminds those subject to the law to apply asset freezing measures without delay.
In this sanction, the reporting entity filtered its customer base annually, then monthly... Insufficient for the ACPR (which, as a reminder, in a previous sanction had also rejected the weekly frequency).
The ACPR also points out that the reporting entity did not systematically carry out checks when entering into a relationship or just before carrying out a transaction...
Result? Several contracts signed/maintained with a company run by a person subject to a freeze order (fortunately, no funds were paid out).
AP Solutions IO's opinion: It is essential that your screening tool continuously updates all lists (Assets Freeze, Sanctions, PEP and close relations, Reputational risk...).
It is then essential that your tool filters your entire customer portfolio on a daily basis. This automated screening should then highlight only new alerts or alerts that have undergone a major change. For the sake of productivity, previously decided alerts that have not undergone a major change should not be resubmitted to the decision of an operator/analyst AML-CFT.
When you enter into a relationship, your tool should immediately inform you whether or not there is the slightest suspicion that your prospect is on an official list. You can then adapt instantly, for example, by requesting additional documents for your KYC.
Gaps in the internal control system
The ACPR reminds us that reporting entities must ensure the effectiveness of the measures they have implemented in terms of AML-CFT and, more specifically, the freezing of assets.
The ACPR considers this internal control to be inadequate, since it is limited to verifying that first-level controls have been properly carried out.
AP Solutions IO's opinion: It is essential that the AML-CFT tools be parameterizable and take into account all internal Compliance criteria. We note that the ACPR is adamant about any inconsistencies found between the theoretical compliance policy and the configuration of its tools AML-CFT. What's more, this parameterization must be easily exportable, so that an auditor can be presented with an explanation of how the system works at any time.
As soon as there is consistency between the theoretical Compliance policy and what is put into practice, internal control is simplified.
However, the tool needs to be able to extract a large amount of data in order to respond to various operational, regulatory and statistical concerns...
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