AML-CFT Compliance: What are the Three lines of Defence?

The “Three Lines of Defence” is a widely used coinage for describing how businesses and organisations should structure and deal with their Anti-money Laundering (“AML”) risk. Businesses can use the “Three Lines of Defence” to minimise the gaps in their AML risk management. Failure to ensure AML compliance in the UAE will lead to hefty penalties and reputation damage.

Knowing about the three lines of defence and implementing them in your organisation will strengthen your AML compliance framework in the UAE. AML consultants in Dubai can help you in this process. Read ahead to know more about the three lines of defence for AML compliance:

Line of Business: The First Line of Defence

The Line of Business, also known as the front, involves customer-facing employees. They are best equipped to gather the information your company require to meet your due diligence obligations. The first line of defence can also include operations, risk, and control teams that support the business. The line of business is also responsible for implementing and maintaining policies and procedures and communicating these to all employees.

The first line of defence is also required to establish procedures for screening personnel and deliver proper training on AML/CFT policies and procedures based on roles performed. AML consultants in Dubai can help the companies create the content for the AML training. However, the senior management should also review and agree upon the training content.

AML Officer: Second Line of Defence

The AML compliance office or the Money Laundering Reporting Officer (MLRO) forms the second line of defence for AML-CFT compliance. The MLRO will be responsible for the ongoing monitoring of the fulfilment of all AML/CFT obligations by the company. The MLRO is the contact point for both internal & external authorities, including supervisory authorities and financial intelligence units (FIUs). The company’s business interests should not hinder the effective discharge of the above-mentioned responsibilities of the MLRO.

It is imperative to avoid any potential conflicts of interest regardless of the size of the business or its management structure. The MLRO should not be given the responsibilities of the first and second lines of defence to enable unbiased judgments and facilitate impartial advice to management. If any conflict of interest arises, procedures should be implemented to ensure AML/CFT concerns are objectively considered at the highest level. Avail of AML consulting services in Dubai for more information on the responsibilities of the MLRO.

Internal Audit: Third Line of Defence

The internal audit function is regarded as the third line of defence for AML compliance. The internal audit helps the companies evaluate their risk management controls and discharges its responsibility to the audit committee of the board of directors or a similar oversight body through periodic reviews of the effectiveness of their AML-CFT compliance obligations. AML consultants in Dubai can help with independently auditing the effectiveness of your company’s AML-CFT framework.

Businesses should first establish policies for auditing the adequacy of their AML-CFT policies and procedures in addressing identified risks, the effectiveness of the staff in implementing the organisation’s policies and procedures; the effectiveness of compliance oversight and quality control including parameters of criteria for automatic alerts; and the effectiveness of the company’s training of relevant personnel. The internal audit assessment can include the following:

  • A review of both strong and weak elements of the AML/CTF function (as well as sanctions compliance activities)
  • A set of readily identifiable recommendations with target dates for implementation as well as a list of names outlining responsibilities
  • For any additional research senior management needs to sign off on the report

Hire the Best AML Consultants in Dubai, UAE

Businesses need to strengthen their three lines of defence to mitigate the risks of money laundering and financing terrorism (ML-FT). AML consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help businesses by offering relevant advice. JCA is one of the premium accounting companies offering bespoke AML consulting services in Dubai. JCA is one of the leading AML advisers in the UAE dedicated to saving your organisation from a possible compliance failure. JCA chiefly offers the following types of AML compliance services in the UAE:

  • Industry-specific AML Risk Assessment
  • Implementation and review of effective AML/CFT program
  • Advice on staffing requirements for AML/CFT department
  • Assistance with staff awareness training
  • AML Penalty Appeal Services