Anti-Money Laundering (AML) Practices at Bank Sohar, Sultanate of Oman

Integrity related practices are assuming great significance in the corporate governance of any financial institution today. This case looks at the Anti-money laundering (AML) practices at Bank Sohar, Sultanate of Oman. After a brief description of the company, the policy related to AML at Bank Sohar is described followed by the discussion of the process for embedding the policy within the organization. The mechanism for identifying and reporting the issues pertaining to the practice within the organization is explored and the mechanism for enforcing the practice is studied. Findings of the study suggest that the entire organization has to work together in order to create fool-proof policies leading to better acceptance and implementation. The practices follow the recommendations of Financial Action Task Force on Money Laundering (FATF) and other international studies in an effort to keep Bank Sohar free from any AML concerned potential threats.


Introduction
Money laundering has been called the world's third l[rgest industry [nd is [ssoci[ted with [ll m[nner of crime (Baily, 2000). Money laundering is defined as the processes of making illegally-g[ined proceeds (i.e. "dirty money") [ppe [r leg[l (i. due to large number of agencies involved and the failure of government mandated measures and the need for private sector actors to take more responsibility.

Literature review
Banking encompasses a wide spectrum of activities, thus, providing large possibilities in this domain to carry out various abuses related to money laundering. Financial Action Task Force on Money Laundering (FATF) is one of the leading international organizations for the prevention and fight against money laundering. This working group cooperates closely with World Bank and International Monetary Fund for the establishment of financial and regulatory measures against money laundering. The group prescribes twenty-five criteria that a country should consider. These include:  Establishment of strict procedures of "know your customer" in order to be fully [cqu[inted with legitimate activities of each client; With an intention of identifying and controlling various potential illicit practices, banks are introducing Know-Your-Customer (KYC) provision. However, banks need to take care of the implementation, as there is no obvious end point to the information that would be useful to a bank manager in seeking to prevent money laundering in KYC. Also, it is hard to deal with third-party introducers (where the main beneficiaries wish to remain anonymous) and it can be h [rd to b[l[nce KYC with customer's right to priv[cy (J[ckson, 2000);  Refusal to establish a corresponding banking relation with a respondent in jurisdiction, or to continue the relation in the jurisdiction in which he is not physically present; This provision is taken care of by requiring depositors to sign a document stating that the deposit by any non-citizen, whether individual or a company, is dealing with money legally earned and legally transferred (Baker, 1999);  Training of employees who work with corresponding accounts to recognize high risk circumstances or irregular activities;  Conduct sporadic control of all the relations of the corresponding accounts with foreign banks in order to identify higher risk respondents and close the accounts with problematic banks;  Report to supervising bodies and units of financial inquiry all the problems they have been facing in working with foreign responding banks.
To deal with the money laundering practices associated with electronic money transfer, following measures  Revision functions for testing the system of measures against money laundering.
The above review considered the available literature on the recommended practices to identify and prevent AML activities. and Oman Investment and Finance Co. SAOG with 13.5% of the holding respectively. Bank Sohar offers a wide array of products and services which include retail banking, corporate banking and Islamic banking among others (Bank Sohar SAOG, 2014).

Case study on Bank Sohar
In its seven years of journey, Bank Sohar has exhibited substantial growth and performance. Bank Sohar has managed to grow to become the fourth largest and one of the most profitable banks in Oman. In spite of increasing competition, Bank Sohar registered a net profit of RO26.871mln for the financial year of 2013 compared to RO23.011mln of the previous year entailing a year-on-year increase of 16.77 per cent (Muscat Daily, 2014). It has the highest ROE (Return on Equity) amongst all the listed Commercial Banks in Oman. This is a result of higher asset leverage. Non-Performing Loans are at an acceptable level of 1.6% of Gross In reflection of its excellent performance, Bank Sohar has received 11 foreign, regional and local awards over 3 . 2 B a n k S o h a r i n t e g r i t y -r e l a t e d p r a c t i c e Bank Sohar maintains specific focus on AML practice due to two driving forces -firstly, the compliance requirements from the authorities and secondly, its core value of maintaining "integrity". When interviewed  Risk assessment with appropriate due diligence processes to evaluate various categories of customers, their account details along with the transaction types. Incorporation of a system that not only maintains a record for each new customer with required details but also identifies and maps high risk clients.
 Identify and report suspected information obtained by screening customers and transactions against list of persons, entities or counties issued by government-competent authorities. The role of Audit Committee is to assess and review the financial reporting system of the bank to ensure that the financial statements are correct, sufficient and credible. The committee reviews the adequacy of regulatory compliance, regulatory reporting, internal control systems, structure of internal audit departments, and compliance of their staffing and holds discussions with the internal/external auditors on significant findings and control environment. The Head of Internal Audit and Head of Compliance report to the Audit Committee.
The Head of Internal Audit is responsible for the operational control as per the framework. The Head of  B[nk Soh[r" s[ys Mr. Amr[n [l B[lushi. AML policies are first oriented to employees at various levels using a series of methods. Firstly, AML policies are posted online on the intranet and all employees are required to sign in and read the policy. Then, they are made to answer 15 questions that reflect the level of understanding of the employees to ensure practice at the workplace. For other policies, employees are selected and sent for in-house training sessions conducted in classrooms. Bank Sohar has a well-established learning center consisting of several senior trainers who carry out these trainings. In-house programs last from half a day to sometimes a full day. The Centre is also responsible for designing and documentation of new training materials. Further, some employees are sent to College of Banking and Financial Studies (CBFS) to attend additional courses about topics like Information Security Awareness (ISA) etc. In the process of implementation, the primary obstacles identified include budget and the time allocation for such activities. However, with the support from the higher levels, these issues are resolved. Many employees have undergone the phased training sessions and have been found to actively use these skills and knowledge at the workplace. Anti-Money Laundering (AML)

Identification, reporting of issues and enforcement
Issues that fail to comply with the regulatory and AML framework are identified by the employees in the concerned department and reported to their immediate line manager as per Mr. Amran al Balushi. Depending on the sensitivity and seriousness of the issue and the person suspected in the malpractice, the line manager escalates the issue to the Internal Audit and Compliance department. If the immediate manager is the suspect, the employee is required to approach the manager within the department. Whistle blowing is also encouraged which either can be through writing or by calling a telephone number dedicated to whistle blowing. The Internal Audit and Compliance department takes it up with the appropriate sub-committee at the higher level. The respective committees present their reports to the Board of Directors.
During the interview Mr. Amran al Balushi confirmed that external auditors, internal auditors, and compliance officers are responsible for enforcement at Bank Sohar. During this enforcement process, compliance officers review all the departments and ensure that all policies and procedures are complied without any failure. If not, then, they report to the management. Internal Auditors do the same job and try to dig out any lapses in existing policies and procedures that may need development. Sometimes, they find old policies which had not been developed, and the same is reported to the management. External Auditors assess the financial details and try to unearth any misreporting or miscalculation of facts and figures. In addition, the fraud auditors check for frauds by ensuring compliance to the established policies and procedures. It can be said that enforcement is carried out jointly by different teams who at the end of the day make sure that the practices are enforced for better governance. The following lessons were learned as a result of this study: a) Effectiveness of any process depends on the degree of inclusion. The process of inclusion makes sure that the whole organization works as a team to design fool-proof policies leading to better acceptance and implementation; b) Following best practices ensure effectiveness and profitability of any organization; c) Quality at source in terms of sound practices is paramount to total quality, thereby, ensuring creation of customer loyalty and equity. This is a path to sustainability, finally, culminating in enriched stakeholder value.

Conclusion
Money laundering or the financial means of organized crime are extremely difficult to tackle due to various reasons. Hence, it becomes joint responsibility of the central bank of the country along with the individual financial institution itself to formulate policies towards identification, enforcement and reporting of any malpractices. This case study reviewed the structural framework adopted by Bank Sohar to keep updating with the changing environmental conditions. A brief assessment of policies, process and practices for embedding and enforcing AML practices undertaken at Bank Sohar was conducted. It was found that the