Posted by John Byrne in AML Fraud and other things
* * *
For those of you with young children, you have probably heard them clamor to see the new Smurfs movie on July 29th. (Some of my kids, who are over 18, would rather see "Horrible Bosses," but that's a different conversation.)
Smurfs mean something quite different to the AML community--not little blue men, but the movement of illicit cash in small increments into financial institutions in order to avoid reporting. (Note: I actually have a coffee mug, given to me by some friends from IRS Criminal Investigation Division, which simply says "Don't Smurf on My Turf.")
The question in 2011 remains--how essential is detection of "smurfing" to the joined battle against money laundering?
Well, I am clearly not objective, having pushed for dramatic changes to the cash reporting obligations for the better part of two decades. My reasoning was simple: Doesn't it make more sense to spend our resources on programs and policies designed to find "suspicious activity," as opposed to tracking cash transactions from Radio Shack?
As you know, I lost that fight and "smurfing" or "structuring" is still a very useful tool for money laundering prosecutions. Still, with electronic and mobile banking; trade-based money laundering; and products such as remote deposit capture, I wonder if smurfing is not just low hanging fruit...
FBI Director Robert S. Mueller has held that post for ten years and the Obama Administration wants to extend this clearly bipartisan choice for two more. But Republicans are potentially planning to hold up this important re-appointment for reasons unrelated to Mueller's effective oversight of this essential counter-terrorism agency.
All I can say is:
"Are you kidding me?"
Have some BSA obligations become a burdensome habit?
Last week, I was fortunate to have moderated a panel discussion for my organization, ACAMS, with Dan Stipano from the OCC and Mike Kelsey from Capital One.
Dan, one of the most committed public servants I have ever been honored to work with, pointed out that Bank Secrecy Act (BSA) obligations over the years may have lost sight of their original focus and placed on financial institutions an untenable burden. Dan's comments on the bar being raised were coupled with strong admonitions about banks missing some basic BSA obligations, but his strong statements about the breadth of obligations on institutions with finite resources bear repeating. (Note: ACAMS members can listen to this program on www.acams.org)
Other areas of focus for the audience were the common themes or "root causes" of the several AML enforcement actions in the past year. Causes of note were:
- • Elevation of the business line over compliance function.
- • Offering products without adequate controls in place. (I would add that the industry also needs to ensure that compliance officials have improved banking knowledge.)
- • New technologies and lack of proper oversight and training.
- • Cost-cutting in this difficult economy that impacts compliance.
- • Compliance programs created are not commensurate with the risks.
These causes of dramatic enforcement actions can be addressed with expansive thinking and clear strategic goals.
In the same program, Mike Kelsey made sure that listeners paid attention to the impact of the Dodd-Frank regulations on examination coverage and resource allocation. AML officials should continue to expand their education and stay engaged with Dodd-Frank discussions within your institution. (For our foreign readers, an expansion to "pure" banking challenges in your region is also essential.)
A reminder that an AML penalty draws great attention can never be mentioned too often.
A continued commitment to a worthy moral cause
We have mentioned the shared goal of attacking human trafficking several times in this space. ACAMS held its second program on this topic and two things struck me: the overall commitment from the financial sector and the grassroots efforts to combat this crime.
Human trafficking is a global crime that knows no boundaries. For example, here is a Midwest organization that is extremely effective:
If you are able, please consider establishing a similar group in your region.
Can we learn from a cartoon?
The Smurfs won't teach us anything about AML but this is a good time to discuss overall AML strategy with our government counterparts. We are not equipped to address every illegal activity but we certainly can, in a unified effort, focus on the most important.
Asking us to discuss is a major step toward improving our AML strategy.
* "Blue Sky," of course, by the Allman Brothers Band. (In the spirit of disclosure, one of my beautiful daughters is named after an Allman Brothers song, "Sweet Melissa," so I am not objective.)
- 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.