[Music] compliance such a big word such a scary word for some people some people understand it some people don't but in every way compliance is a big word right right now in our world in order for us to uh simplify it and make it easy for you to understand and maybe to to get more information about we invited Jodi Giordano uh my friend my colleague he is the head of compliance at Elnaggar and Partners to tell us more uh about compliance and educate us about uh what does it mean and why why is it important and for who it is important thank you very much Jo for being with us thank you for having me uh can you uh just start by telling us how did you start in this field and why did you choose it okay that was a while ago uh but yes of course so um uh well the story started essentially my first uh my first proper job in inverted commas was with a was with a financial institution giving out payday loans actually in the US Canada Etc I was a customer service rep with them um and obviously you know not nothing against customer service departments in general okay but there was a point where that became not enough not interesting enough for you exactly yeah so I remember I do recall there we had a department called customer relations they were actually doing the onboarding and the monitoring of clients and stuff so remember speaking to a few of my colleagues in that department and genuinely taking an interest because I felt like that was one of the few impactful roles you can have in a big or in a large multinational corporate let's say you know um uh so basically after a few conversations here and there I decided to pursue um I hadn't studied in years but I decided to pursue some qualifications in the field 10 years later here we are well through throughout these years you have worked in compliance in several companies and uh and and in several countries I I I would assume can you tell us what what what's your experience in in this field so um uh after that uh step with the uh with the with the payday loan company uh I did I'm my first role in compliance was actually with um uh an acquiring Bank back in Malta also um acquiring Bank essentially we processed transactions for e-commerce Merchants uh and the likes basically so uh you know had very close relationships with visa and MasterCard so the nature of acquiring Bank basically uh we on board corporate clients ormes who have activity online and who need to accept uh online transactions online payments okay using their Visa Mastercard even their ax cards so my job was to essentially onboard clients same like we do at elag Partners now um uh review the corporate structure identify any high-risk areas any politically exposed persons any complex structur any legal Arrangements involved in the structure you know some trusts any anything of the sort um once we onboard them then of course we have the ongoing obligation to to constantly monitor them after the requiring Bank uh stint which was almost 3 years I moved to a startup uh money service business business company um I was helping get our licenses in the US and kicking off the operations in the EU as well uh that is when I decided to pack and leave uh for Dubai although there was a two-month uh traveling a I traveled Asia for two months in between nice before moving to Dubai and once I got here um I started working with MRE Bank didn't last long that's a story for another day um um but uh yeah after that I started with a capital markets firm with a broke um inter dealer brokerage um I moved on to which was my first experience also I moved on to uh uh CSP this this switch between um Financial Services into uh Corporate Services uh does the job differ a lot is it is it a lot different is the risk is higher or lower your job itself did it make a big change it did it definitely did I can I can say that with confidence because especially with the capital markets firm um even though we didn't take on retail clients so you and me could not open an account with this firm right however our top clients were investment Banks uh the top um commodity firms you know these bmps uh hsbc's you know this kind of this level of of client um uh so that just gives you a picture of the kind of client base but the thing is because we were members of multiple exchanges okay exchanges in the US exchanges in Europe all with different reporting obligations including and sorry over and above the reporting obligations we had locally with the dfsa you know which were already stringent as a financial institution so when you compound all the obl ation that you had all over the world from a different perspective and and granular reporting at granular detail for like at a transactional level as well yeah at a trade level because you know trades can be you know you might see one trade but one trade could encapsulate a large amount let's say of uh transaction within within it exactly so so so all those obligations combined it's a lot it's a lot it's different so then moving on to the the the corporate side the corporate side your primary focus is the AML CFT side yeah of course you still have commercial licensing regulations you know which which which uh which go um which are over and above your AML and CFT um but they're not as it's not as let's say it's still demanding of course but on a not as challenging as Financial Services exactly exactly a corporate provider level you have the authority from one side and you have your clients from the other side and that's what you where you have to uh do your job exactly um exactly very nice that's it can you explain a little bit what is um what's the main job of a compliance officer in a corporate service provider because a corporate service provider as a dnfb and maybe you can give us a little bit of explanation on uh their job is different from being a compliance officer for other businesses like Banking and Financial Services so if you shed some light on that it will be very important for our audience of course um basically that term encapsulates uh csps and law firms such as ourselves um precious metal dealers um accountancy firms these kind of businesses okay real estate agents as well now so the primary difference um in the compliance officer role from a financial uh institution perspective versus a corporate service provider for example is again I will emphasize a reporting requirements or reporting obligations essentially from an onboarding and an ongoing monitoring perspective of your clients and your partners it's the same okay you on board the client the same you look at the client in the same way um you assess the same risks of course the the this the risks differ for each sector um but essentially the the the the idea is the same okay um but again the reporting obligations versus you know as a see as a compliance officer between you know in a financial institution or CSP um again we have noticed the the recent Trend over the last i' say 12 months where Regulators are really stepping down and clamping down on on CSP as we of course as we very well know and I noticed this trend also in Europe uhhuh you know back home in Malta as well I'm seeing the same Trend there's a big focus on CSP specifically as Gatekeepers exactly and enablers uh so-called enablers um uh which is understandable of course as well of course it's understandable the role you your role in in The Firm is is extremely important I mean because you filter out all the clients that we don't need all the clients that we don't want to deal with exactly you get us the background checking and the due diligence uh on on every single client yeah before we contract with them why is it important for me it's it's I for me it's clear but I want you to emphasize this because the nbps we have restate Brokers we have jewelry Traders correct we have uh Auditors accountants uh lawyers all of because we are not used to it back in the days we used to accept everybody as long as we get their kyc documents we check it everything looks good why not come in uh and we start doing business with them with the laws changing uh it is a little bit overwhelming especially for re estate brokers for diamond and jewelry uh dealers I want you to explain why is it important to make sure that these these clients have uh been screened very well the risks have been assessed very well before we go and do business with them let's just something everyone's aware of at the moment you know the ongoing conflicts globally okay um but more specifically uh you know in the in the in the Eastern European uh region let's say you know well-known oligarchs or sanctioned individuals come to you as a precious metals dealer okay and you know however they may have gotten their funds across from their you know jurisdiction over to the UAE however that may have happened for them what they need to do is is primarily you know kind of how do I say obscure the trail as much as possible in terms of the ownership of those assets or the funds okay and what better way to go and spend those funds buying a nice you know I don't know what carrot old diamond ring or or nice apartment or a nice car exactly and after a few months they can sell it or exactly some some would flip it within a few months I mean the real estate uh sector especially is the most vulnerable we've heard of cases of real estate being bought with crypto you know and that's a story another story for another day as well um uh but these stories are common we've heard them we've heard them plentiful in the region you know and um uh why it's important is because uh you are you are at risk of losing your license being fined severely uh all sorts of reputational damage that you could face if you are caught aiding or helping you know or enabling let's use that term stick to that term enabling certain individuals who may or may not be sanctioned or who are high risk or who have some certain adverse media um uh in their past you are enabling them to launder yeah essentially um their cash or their assets clean it and just continue their lives as if nothing is happening um and and they haven't done anything so um that's is that is what you risk you risk your license you risk your reputation yeah you risk your business as a whole you know loss of Revenue nobody wants to associate with with with certain you know companies who have such a reputation AB that's a quick summary yes yes when when we get a new client whether we are lawyers corporate service providers accountants Auditors gold Traders or even real estate broker how do you assess these risks based on what for example um we receive a walk-in client coming to us and say I would like to buy this property or I would like to establish this company um what do you do exactly to assess the risks for us internally and the risk of the client as well exactly exactly so so primarily in order to have a full picture of the the risks which the potential risk the client poses um uh we would need to have a full package a full kyc package of course you know if it's an individual let's say following your example um a passport or passports if their digal nationality yeah I I know personally of people who have up to 12 passports again that's a wow that's a a story for another day as well um you know there there confirmation of where they actually reside residential address um again this is very important that it is not a mobile bill or any other mobile service when I say mobile I mean not just uh your physical mobile but I mean any other service that you're subscribed to that is transferable uh you know across across the world so essentially when we want proof of address we want fixed utilities or Services anyway these are the the the the the basic kyc documents yeah basic due diligence once we have that package um we we we look at of course the full picture and then we have we we do the we carry out the risk assessment and risk assessment looks at essentially five areas so you got the AML risk the client poses the client's risk so it depends corporate individual complex structure or not interface risk or distribution challeng risk which is essentially how did this client come to us where is it introduced was there a third party involved um is is the communication managed by a third party or not you know as well so producing a layer between us as a service provider and and and the end client you know again which is a let's say something to to flag a red flag let's say um and and AML CFT risk yeah distribution Channel risk uh that's essentially it and the client risk depends in which uh industry they might be operating in as well online gambling high risk let's say uh I would say spare parts and heavy machinery for example or gold and mining for example these are whole high-risk Industries which we need to consider for uh the risk assessment as well those are the primary areas we look at um when assessing a client um and once we have done that we we we determine um the risk rating again there's a logic behind this and uh a lot each firm has their own um way of calculating um each firm has a way of determining this risk yeah why do you think a country like the UAE which is majorly reliant on uh on on U on foreign direct investment and entrepreneurs are coming to the UAE and investing here uh to make such a a very strong system and to tackle and push hard on the anti-money laundry regulations and uh don't you think this will stop a little bit the the the flow for such Investments and such entrepreneurs coming to the UA why is it important overall it's a positive change right like we said earlier it's a positive change that they're they're they're kind of stepping down clamping down um on the on the uh the the Gaye Keepers right uh locally in the UA uh however I'm pretty sure also on the flip side that it has had a negative impact and certain uh you know businesses which want to expand in the region maybe they have chosen alternative destinations again it depends you know on on on how much uh how much people can tolerate the bureaucratic processes in place again UAE countries in Europe the the the the process is super bureaucratic anywhere you go so you know it just depends on you know what what um just depends on your patience levels essentially okay okay but yes I'm uh it is important it's a process that has to happen anyways it's not there's no way around it it's it's very important I've seen Ministry of economy have been doing significant work towards yes um regularizing and and updating their regulations and even chasing the nbps into uh correcting their measures and fixing their situations and even revoking some licenses making some fines here and there to make sure the quality of work on the due diligence uh and the the the compliance part in general is happening have you seen this as a positive is is get making a positive impact in the economy here and the economy as a whole I I'm not to Sure however on that point about the the awareness levels that the the the the authorities and The Regulators are taking here you know rolling out here it's a I tip my hats off to them honestly because the Outreach has been very good with the private sector you know um from their from their end and um you know we we we I think almost on a I would say on a almost on a monthly or bonly basis we have some webinar by you know by by the executive office another webinar by the adgm for example hats off to them you know they're really putting in the effort to to educate the the the private uh industry um you know especially again with a focus on csps and and law firms you know and uh yeah you you don't get it you don't get that kind of volume of awareness uh anywhere else so far that I where I have been not not the same volume and that's why you know UA is is really doing a great job and again jumping back to our previous our previous topic uh because I didn't fully answer your question um for smmes or businesses in general wanting to to expand you know grow their business I mean it's still you know the fact that UA is clamping down is uh implementing a more robust um regulatory regime should be seen or should be perceived as a positive yeah because ultimately it's their business that's going to be protected at the end of the day um that's going to be establishing a reputable jurisdiction uh you know and uh globally now the UA is getting you know there was there there used to be a a certain reputation of the UAE um a few years back but I think in general people are now starting to realize that the UA has established itself as a as a as a really reputable jurisdiction now and of course our recent uh removal from the fatf uh list has also had a huge impact uh which is good you know kudos to the to the UAE authorities and uh can you talk to me a little bit about the process of screening and onboarding new clients into a Naran Partners sure um uh so again um we previously touched upon the list of documents that we request um we are going to request these documents initially once we have built the profile of the client based on the documents we receive we will screen uh we'll screen the client directly and any involv both parties let's say it's a corporate we'll screen the shareholders we screen the directors um uh we'll also review source of wealth um especially and source of funds uh in detail um once we've built the profile and we're confident that there are no high-risk indicators that need to be looked into in more granular detail um or any escalations which we need to kind of raise with either myself as the mlro or um with you as the as the managing partner then we would pretty much accept and that's that's a process done I mean typically that process is done within let's say 24 hours uh typically but then if there is a complex structure or it's a complex request or high-risk individuals involved then we will take our time to review it in more granular detail and uh even ask for more information or documents if necessary what happens if a client at any certain point felt uncomfortable to give too much information because they are not used to it I know for a fact clients who have been here in the UAE since 20 or 25 years they got used to or they used to have a much simpler way to establish companies and to get on boarded by by law firms they they were not used to so many questions from your perspective how what does that make you feel or or what does that make you decide as a compliance officer of a company whether you on board this client or not first of all communication is key with the especially with all clients obviously um that's an obligation we all have but communication is key you know if the client starts to get frustrated because of the volume or level of documents that is being requested um first and foremost we need to communicate them to them clearly our obligations as well okay as a regulated business so again we would emphasize that it is we need to emphasize to them if so if if if the situation starts to become tense and it starts to get escalated and people start asking not to they refuse to provide X document or which happens a lot which happens a lot of course because because I see this also from a banking perspective you know Banks now are monitoring clients on a much shorter uh period so you're being requested for the same documents you provided at account opening stage and you're you have to supply them let's say within a six-month period again you know uh including certified documents so you can understand the end clients frustrations from certain aspects but again it's important that we communicate clearly uh both our obligations and the fact that we want to operate a legitimate business and we don't want to tolerate any any illegitimate activity uh in our in our company um so that should also give them the reassurance that we are you know um operating at a certain standard and we won't and we will not kind of um how do you say uh compromise with that standard yeah I will talk to you from from a consultant perspective from the law firm perspective or a CSP we have so many clients we have so many companies in different jurisdictions um of course we screen every client in the beginning at the start of the relationship and with spvs with very limited business activity here we do not have visibility or clear visibility on every single client what is Our obligation towards screening those clients on on on a regular basis how do you screen them because it seems like we have a quite a high responsibility towards the authority and towards the business community in the UAE how do you screen them so the initial approach is always again once we've built a full picture of the clients which we like you said we would have already had and on on on an ongoing basis we would um we would uh first of all reach out to the client and request similar documents to ensure that there has been no changes again as a CSP if there's been changes to our client from a from a corporate structure perspective we would know of course because we're carrying out the share transfers change of directors this is all stuff we have control over we Monitor and Screen actively Upon A change in in structure as well so that's one perspective let's say we have a corporate client okay and uh we are providing whatever service legal tax account whatever whatever and they're an ongoing client so we've had them for a long time what we would do is first of all reach out to the client to make sure no information or structure there has been no change in information or structural changes okay um so we would request a certificate of incumbency we would identify the directors and shareholders again for example once we have built that picture again whether there's been any changes or not since since we had onboarded them then we will run them through our uh through our screening our third party screening tools uh which essentially will screen individuals and entities for adverse media any open court cases any any sanctions any criminal charges um could be anything and we have found all sorts even in my past we've I've I've been using these tools for 10 years plus now uh and I've seen all sorts of all sorts of things so um typically they are good tools very useful tools and also mandatory mandatory tools right for FIS and dnfbps as alike what kind of advice would you give to the nfps who are not very much aware of their obligations into uh to towards Authority with compliance what I would probably do um as a starting point I would I would probably whether you hire a full-time or you contract an experienced compliance officer who has exposure who has had exposure in the industry you operate in and as a starting point I would hire this person um and establish a compliance manage management plan or compliance monitoring program which encapsulates essentially the specific regulations um that you need to uh abide by basically um following of course practical advice on how to achieve that you know so this the CMP would encapsulate this this data and that would definitely be a starting point which would make it easier for you to monitor easier for you to know where you need to be looking um and not kind of going all over the place because again there there's so many regulations out there um that it can get overwhelming but as a starting point I would start there and Carry Out Gap analysis uh between uh you know your current your existing operations versus your obligations from a regulator perspective carry out that Gap analysis and start and start taking action start closing those gaps if there are any um and that will get you pretty much to where you want to be thank you very much for coming thank you for having happy to have you safeguarding the company and the the UAE in general this was your dose from Monday legal see you next week