Posted by John Byrne in AML Fraud and other things
Had the pleasure of seeing Jackson Browne in concert last week and he is clearly doing better than many of his music peers, in performing strong at 61. One of his hits, “Running on Empty,” made me think about AML compliance challenges in tough economic times.
Despite what you may have heard, the regulators and law enforcement still consider money laundering prevention and detection to be a priority. We know that Congress and the Administration are focused on consumer laws and regulations, but it is also essential that the financial sector stay engaged in AML oversight even with fewer resources available to perform the same tasks.
Just last week, the leaders of the 9/11 Commission (http://tinyurl.com/911GroupReturns) stressed that the nation must not lose sight of the need to enact more of the recommendations from its 2004 findings and must continue to address problems such as cyber attacks. Also, the disclosure of the massive money laundering ring in New Jersey that included trafficking in human organs (folks, you can't make this stuff up), and the obvious attempts to evade taxes through offshore activity, guarantees that AML programs will continue to be tested over the coming years.
How do we ensure that our institutions stay engaged? Can you do more with less?
Well, it is doubtful that you can do more with fewer resources.
So communication (a lost art, by the way) is the key.
Strategy for the duration of 2009 and beyond
It is time to reassess your AML strategy (“retool and refuel,” so you are not running on empty). One clear value addition for banks of all sizes is peer comparisons or information sharing.
AML strategy is not a competitive issue. As a result, many AML professionals are more than happy to assist peers in compliance stress. There are a variety of ways in which financial institutions can improve their AML programs through information sharing. Here are a few suggestions:
Mine your business groups. Trade associations can help you communicate to senior management the national and regional trends of examiners and law enforcement. The key information comes from scheduled conference calls or electronic newsletters.
Seek out vendor group meetings. Several consulting firms offer “share forums” and invite regulatory representatives to share their insights. These are typically for the largest banks, and done in person, so it will be time out of the office, but usually only a day. These are typically by invitation, but I urge you not to miss them.
Don't forget tried-and-true approaches. Webinars, conferences, and seminars can add real value, if they offer practical advice. Conferences have the added benefit of networking, a value that can be utilized for many years to come and well worth the price and time out of the office.
As you glean critical information from these various vehicles, explaining to management what you have learned is the next essential step.
Give senior management short, concise summaries of trends, new rules, or agency guidance, with bullet points describing impact on the institution. Scheduling a conference call with appropriate parts of the institution (or meeting with the CEO in a community bank) will give affected staff the opportunity to ask questions and enable you to get feedback.
Remember, continuing to get resources, retaining necessary tools, or simply making management aware all demand communication.
There are means to trimming the costs of staying informed. For example, while the vendors selling them will not want to hear this, you can cut some costs of keepng up by forgoing “clipping services.” Instead, train staff to find regulatory changes and updates from agency websites, including FinCEN, the Federal Reserve, the Comptroller's Office, and others.
Other AML Tidbits
As this blog moves forward, at times, in addition to the main point of the week, I'll pass along issues you should be aware of, developments you'll want to track, and AML/BSA news you may have missed. This installment's selection:
Nonbank mortgage makers and BSA/AML duties. FinCEN has issued an advance notice of proposed rulemaking (ANPRM) on the possible application of anti-money laundering (AML) program and suspicious activity report (SAR) regulations to non-bank residential mortgage lenders and originators. FinCEN seeks comment on whether there should be “an incremental approach to the issuance of regulations” to certain loan and finance companies. Banks should comment on this potential leveling of the AML playing field. See http://www.fincen.gov/news_room/nr/html/20090715.html.
Join AML and Fraud? One of the issues that AML peers are discussing is how (or whether to) combine AML and fraud detection, or at least how to leverage those issues together. FinCEN Director Jim Freis had some interesting comments on this important topic before the Mortgage Bankers Association:
“We understand that AML is sometimes viewed as purely a cost-center driven by regulatory requirements. A large part of this is due to the fact that the benefits of running an effective AML/CFT program accrue to the financial system as a whole and society at large. Money is spent by the institution for technology and personnel necessary to detect and report suspicious activity, but there is little for the bank to recover to make up for their expenditures. For the financial institution, the business case for fighting fraud is a much easier argument to make if every investigation aims at least in part to recover proceeds of fraud.”
[Editor's note: For those who aren't familiar with it, “CFT” stands for “Countering the Financing of Terrorism.]
Must-not-miss meetings. Limiting participation by AML professionals to conferences in this environment is short-sighted and will not, in the long run, be a cost saver. I highly recommend banks of all sizes to consider two important conferences this fall. (A disclaimer: I am involved in both events. I believe strongly in their value)
The ABA/ABA Money Laundering Enforcement Conference, held each year in Washington, D.C., brings together regulators, lawyers, and bankers for practical advice on exams, new rules, guidance, and trends. Check out the information at http://www.aba.com/Events/MLE.htm.
The Association of Certified Anti-Money Laundering Specialists (ACAMS) is meeting on September 30 and provides, among other things, roundtables for AML professionals to share best practices. Go to: http://acams.org/
Final words for the week
The former chair of ACAMS, Dan Soto, is stepping down from the ACAMS Advisory Board in September. Dan was the first Chair and led ACAMS to the place it is today-10,000 members and going strong. Anyone that knows Dan is well aware of his professionalism, calm demeanor and leadership. He was never “running on empty.” Thanks Dan.
About John Byrne, CAMS Byrne leads Condor Consulting LLC, a Washington, D.C., area financial services consulting firm specializing in regulatory management, AML, privacy, and a vast array of financial institution compliance related issues. 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 the creation of his firm, John was the Global Regulatory Relations Executive at Bank of America. Previously, 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 email@example.com. His web page can be found at www.thecondorconsultingllc.com
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