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Improving auditor effectiveness in assessing KYC/AML practices Case study in a Luxembourgish context

Improving auditor effectiveness in assessing KYC/AML practices Case study in a Luxembourgish context Purpose – The purpose of this paper is to report on the suitability of an ISO standard to create an internal control assessment model, which effectively acts as a control system template and mental model to evaluate compliance with the Know Your Customer (KYC) and anti‐money laundering (AML) requirements in the Luxembourg retail and private banking sector. Design/methodology/approach – This paper used a qualitative approach with various focus groups and case studies, to elaborate and validate the developed model through methodological triangulation. Findings – The proposed assessment model has a matrix structure that facilitates the incorporation of checklists and narratives to ensure effective testing of controls and its structure allows targeting specific areas of risk in the identified KYC/AML processes. Research limitations/implications – The development of the model tended to be time consuming and could explain why matrix formats are used less often and the traditional limitations of a qualitative research apply. Practical implications – The model can be used to combine various reporting formats on internal control, hence the audit effectiveness can be increased and information asymmetries can be reduced. Originality/value – The proposed assessment model offers an innovative approach because it combines a process view of the business with an internal control view. Research in internal control assessment models has been very limited in the past years. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Improving auditor effectiveness in assessing KYC/AML practices Case study in a Luxembourgish context

Managerial Auditing Journal , Volume 26 (2): 22 – Jan 4, 2011

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References (76)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0268-6902
DOI
10.1108/02686901111095038
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to report on the suitability of an ISO standard to create an internal control assessment model, which effectively acts as a control system template and mental model to evaluate compliance with the Know Your Customer (KYC) and anti‐money laundering (AML) requirements in the Luxembourg retail and private banking sector. Design/methodology/approach – This paper used a qualitative approach with various focus groups and case studies, to elaborate and validate the developed model through methodological triangulation. Findings – The proposed assessment model has a matrix structure that facilitates the incorporation of checklists and narratives to ensure effective testing of controls and its structure allows targeting specific areas of risk in the identified KYC/AML processes. Research limitations/implications – The development of the model tended to be time consuming and could explain why matrix formats are used less often and the traditional limitations of a qualitative research apply. Practical implications – The model can be used to combine various reporting formats on internal control, hence the audit effectiveness can be increased and information asymmetries can be reduced. Originality/value – The proposed assessment model offers an innovative approach because it combines a process view of the business with an internal control view. Research in internal control assessment models has been very limited in the past years.

Journal

Managerial Auditing JournalEmerald Publishing

Published: Jan 4, 2011

Keywords: Luxembourg; Internal auditing; Internal control; Financial reporting

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