|Forty years ago, CSNY (ask your parents)
released the album with the above title and dramatically changed rock.
Earlier this month, I could not help but wonder, while reading the
press accounts of banks exiting embassy accounts, "Haven't we all been
The issue, for those new to BSA/AML, is that several of the largest U.S. banks have told embassies, of an estimated 40 countries, that the institutions would be closing the business accounts immediately, or by March 2011.
What is strange about the media accounts is that all sides seem to pretend that this is a new problem. Bank representatives quoted in the stories simply make benign statements, such as: they remain committed to providing banking services to diplomatic communities. Regulators say they do not discourage banks from providing services to embassies. And the State Department feigns outrage that these commercial decisions will adversely affect diplomatic relations. All sides are acting as if someone else is to blame and this problem just surfaced.
Well, "we have all been here before."
Remembering Riggs and the aftermath
Just six short years ago, the reaction to the compliance deficiencies at Riggs Bank in Washington, D.C., resulted in aggressive oversight by bank regulators; needed changes in bank programs and policies; and a loss of service for embassies in the U.S. that needed basic banking services. Several banks exited the activity and the U.S. bank regulators and the State Department begged institutions to return to providing this service.
The same arguments from all sides were reported by the media then, and the November 2010 stories seem to rehash the same arguments and same incorrect reporting on what laws are applicable. For example, referencing a "Know Your Customer" law is news to me.
We are back to the same challenges-regulators who are clearly warning banks about embassy banking (despite their protestations to the contrary); banks that have decided that the compliance obligations to retain embassy accounts are not burdensome but not clear; and a State Department that only seems to engage when foreign ambassadors complain to the press about closed accounts-when they know their countries are riddled with problematic, if not outright corrupt, financial transactions.
A solution to the current controversy
No one's hands are clean, or entirely dirty.
Banks correctly review enforcement actions as a direct message to improve AML compliance. State Department officials want to avoid repercussions against U.S. diplomatic staff, and bank regulators want to ensure that the regulated have adequate programs to report possible violations of law.
However, we need someone to remember back only six years ago and get all parties together and deal with this issue, outside of the media spotlight.
Perhaps reissuing 2004 guidance, updated to reflect typologies evidencing new forms of corruption, would be a good first step. It helped in 2004, let us try it again.
At least some of us have been around to know that, as David Crosby once sang, "We have all been here before."
Traveling Update and Key Themes for 2011
With a month remaining in 2010, I have been fortunate this year to meet AML professionals in many countries, and remain impressed by the common commitment to protect the financial sector from crime and corruption.
For example, representatives from MSBs, banks, securities, insurance, as well as the public sector, in an ACAMS program I attended in Mexico City in early November, all sounded the alarm of the need to expand their compliance and risk management knowledge beyond AML.
I remain convinced that understanding sanctions, corruption, financial crime, and actions such as human trafficking are essential goals for all of us and we will be tested in 2011. As I have said before, I am optimistic we will succeed.
I haven't spent too much time in this blog recommending books (although I may start) but wanted to pass along a new look at the financial crisis.
While he may not be everyone's cup of tea, Matt Taibbi of Rolling Stone magazine presents an edgy, interesting view of what we all experienced in Griftopia. While you won't agree with everything, there will be no denying that you have not read a financial book like this one.
- About John Byrne, CAMS Byrne is Executive Vice-President of the Association of Certified Anti-Money Laundering Specialists (ACAMS). He has written extensively on AML issues for 25 years and has appeared on television and testified before many congressional committees on AML-related policy issues. Prior to joining ACAMS, John was the Global Regulatory Relations Executive at Bank of America. Previous to that, he worked for the American Bankers Association for 22 years and was responsible for ABA's lobbying, regulatory, and educational efforts on money laundering, and other compliance issues. He received the ABA's Distinguished Services Award and was also the first private sector recipient of the “Director's Medal for Exceptional Service” from the Treasury Department's Financial Crimes Enforcement Network (FinCEN). Byrne can be e-mailed at firstname.lastname@example.org.
From ABA Government Relations:
Follow developments with the Dodd-Frank Act's implementation with ABA's Dodd-Frank Tracker. Learn more, and sign up for alert services now
FORMER LAUNDERER'S DUE DILIGENCE TIPS ON TAP: Banking lawyer-turned-launderer-turned-consultant Ken Rijock warns bankers never to reveal reasons when turning down prospective customers. Read his tips given at ABA's 2010 Regulatory Compliance Conference
HELPFUL LINKS: 2010 American Bankers Association/American Bar Association Money Laundering Enforcement Conference: This longtime favorite of the compliance fraternity was recently held. For those unable to make it to the live conference, recordings, synched to PowerPoints, are available in multiple formats. Click here for details from ABA's audiovisual vendor.