Increasing AML Audit Efficiency A Presentation to the Association of Internal Bank Auditors March 19, 2009 Shaun Creegan Senior Manager

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 1 Current Financial Environment Effects of the Economy on Banking Organizations Current AML Regulatory Environment Improving the Efficiency and Effectiveness of AML Audits Lessons Learned Questions & Answers Agenda

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 2 What the experts say... “…the most wrenching since the end of the second world war.” – Alan Greenspan, Former Reserve Chairman “There has been nothing like the events of late since the Great Depression.” – George Soros, Well-known Investor Current Financial Environment

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 3 Current Financial Environment Sizing the impact of this crisis

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 4  Banking organizations under extreme pressure to reduce costs  Banking industry undergoing significant change  Banks in almost all countries likely to face regulatory reform as a result of the crisis  Senior management, for most organizations, are focused on “safety and soundness” issues Effects of the Economy on Banking Organizations

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 5 Effects of the Economy on Banking Organizations What does this mean for the Bank’s Internal Audit Department? Increased pressure to execute audits more efficiently and effectively Increased pressure to find and remediate potential weakness and control breakdowns Reduce overall cost and time of audits

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 6  Lloyds TSB Bank - $350 Million Settlement  Nigeria’s United Bank, New York Branch - $15 Million Civil Penalty  Sigue Corp & Sigue LLC of California - $15 Million Civil Penalty  E*Trade - $1 Million Fine Current AML Regulatory Environment

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 7  Multiple organizations asked that AML and CTF be discussed as part of the recent G-20 Submit  New Treasury Secretary, Timothy Geithner, has said he takes global AML and CTR efforts very seriously  “The FATF needs to be overhauled and strengthened so it can use its powers to name and shame more countries and groups that flout international financial crime accords” – Global Witness, U.K. based non-governmental organization  Regulatory scrutiny of AML and OFAC risk management will continue to increase Current AML Regulatory Environment

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 8 “Criminals and terrorists do not respect the law; they certainly do not respect national borders. They will seek to exploit the weakest link to move and launder money through any means of financial intermediation. Our joint efforts to root out illicit financial activity increase confidence in and promote the integrity and stability of the financial system. These are critical contributions to helping the banking system return to what it does best, i.e. promoting legitimate economic activity and growth.” James H. Freis, JR., Director of FinCEN Current AML Regulatory Environment

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 9 Improving the Efficiency and Effectiveness of AML Audits Properly plan and scope the audit –Identify areas that require substantive testing and determine appropriate sampling Identify and research changes/updates to AML rules and regulations Talk with your colleagues –Discuss trends and hot topics in the industry

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 10 Make sure the AML audit is well organized Review the issues and recommendations of the last audit –Validate that all management action plans have been implemented Revisit the AML risk assessment and AML program –Identify low risk areas that may not have to be covered every year Improving the Efficiency and Effectiveness of AML Audits

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 11 Leverage audit professionals Set reasonable timeframes Develop and maintain open communication with the AML Compliance team Look for ways to leverage monitoring done by Compliance/Business Improving the Efficiency and Effectiveness of AML Audits

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 12 Incorporate automation and technology into the audit process where possible Communicate potential issues timely with the auditee Complete workpaper documentation during the course of the audit Begin drafting audit report during the course of the audit Improving the Efficiency and Effectiveness of AML Audits

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 13 Lessons Learned Be proactive and assertive Stay up to date with AML issues, guidance and training Network and ask questions Use previous experiences to enhance your approach Keep in touch with audit clients

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 14 Questions & Answers

© 2009 Protiviti Inc. An Equal Opportunity Employer. CONFIDENTIAL: This document is may not be copied nor distributed to another third party. 15