“All Things Must Pass”*

Part 2 of a two-part report

As I mentioned in my previous blog, the 25th Annual ABA/ABA Money Laundering Enforcement Conference did some “lookbacks” at what had occurred and still resonated for the AML community. It should be noted, though, that there were plenty of forward-looking sessions.

They covered such topics as mobile banking, virtual currency, elder exploitation (when criminals prey on older customers), anti-bribery and corruption (now known in the AML field as “ABC”) and “threat finance”—how criminals and terrorists disguise their operations.

The best news for us AML veterans? There were many new and certainly younger experts sharing their knowledge with the audience. And that is a clear and positive sign for the “good guys.” * *

Virtual currency: Fad or something to worry about?

Virtual currency compliance expert Brian Stoeckert outlined for the audience what comprises a virtual or “decentralized” currency:

• An independent online monetary system that combines features of cash and existing online payment methods.

• A software-based, distributed unit of value that does not depend on centralized issuing bodies to operate.

• Value created by the user community, with the operation distributed using an open source system that can be installed on any computer.

I will leave to others to discuss compliance and related challenges, but will simply point out the elephant in the room:

Are we concerned enough about a monetary system completely outside the formal banking structure?

Whatever side you take, AML professionals need to both understand these systems and how to assess their vulnerability to moving illicit funds.

Elder abuse: With age comes wisdom and vulnerability

A clear change since 1989 is the number of issues that AML professionals have become responsible for overseeing. In 1989, cash and wire transactions and what was suspicious in that context was all that was expected of those charged with being the “BSA Officer.”

In 2013, the areas of coverage seems limitless.

In addition to human trafficking, bribery, and terrorist financing, the 25th ABA/ABA audience heard from  the private and public sector on the attacks by the lowest part of humanity—those that take advantage of the elderly.

What I found particularly interesting was some of these facts offered by the panelists:

First, why do the elderly make attractive targets?

Specifically, as a group, seniors tend to possess more money: 

• Persons over 50 control over 70% of the nation’s personal wealth.

• Older Americans are 47% wealthier than the young.

• 81% of households 65 and older own their homes.

• Households headed by people 75 or older have the highest median net wealth of any age group.

• Many seniors do not recognize the value of their assets (particularly homes that  have appreciated markedly).

But then panelists told listeners who the exploiters tend to be:

Relatives. Caregivers. Scam artists. Professionals, including fiduciaries!

(All I could think was, “Relatives! Really?)

The audience was reminded of FinCEN Advisory FIN-2011-A003 on elder abuse and a series of relevant red flags, including erratic or unusual banking transactions, or changes in banking patterns that include:

• Frequent large withdrawals, including daily maximum currency withdrawals, from an ATM.

• Withdrawals from bank accounts or transfers between accounts that the older person cannot explain.

• Bank statements no longer come to the elder’s home.

• Suspicious signatures on checks or other documents.

• Implausible explanations given about the elderly person’s finances by the elder or caregiver.

• A caregiver or other individual shows excessive interest in the elder’s finances or assets, does not allow the elder to speak for himself, or is reluctant to leave the elder’s side during conversations.

The bottom line for AML professionals is that elder abuse needs to be an area of focus—not because it is required, but because it is expected.

(Note: I should add that I personally am not opposed to reporting transactions that may be indicative of elder abuse but I am opposed to a tacit requirement with regulatory criticism for failure to have a process to detect this crime.)

So “Will All Things Pass?”

The very last session of the conference should be a mainstay for every AML conference going forward: What to tell your CEO when you return to your bank.

Recently, I was able to speak to staff at a bank in a Virginia with their CEO in attendance. Afterwards, he thanked me for focusing on the AML environment and giving all his employees a reason to be more vigilant. ABA/ABA accomplishes the same goal—if the audience takes back information to their management.

I am not sure that “All Things Must Pass.”

* George Harrison’s first non-Beatles album has just recently been selected for the Rock and Roll Hall of Fame.

* * “Guys” refers to both genders, people. It covers the AML professional in the private and public sectors. (I do have three daughters).