Are we all doing enough?

Van Morrison remains a prolific singer-songwriter and this line from a 2005 song reminds me that all too often we seem comfortable with the status quo. Or worse, we complain, yet do nothing about the issue or theme that troubles us.

Message in OCC’s Semiannual Risk Perspective

What does this new report actually tell us?

During a recent webinar I moderated with two AML veterans, Rick Small and Dan Soto, we spent some time discussing themes from the OCC’s report. While the report concludes that MRAs (“matters requiring attention”) and AML enforcement actions were down, it went on to point out:

“Bank Secrecy Act (BSA) and anti–money laundering (AML) risks remain prevalent given changing methods of money laundering and growth in the volume and sophistication of electronic banking fraud. BSA/AML risk has increased among community banks during 2012–2013, resulting from increases in the number of higher-risk, cash-intensive customers and internationally oriented transactions. In addition, BSA programs at some banks have failed to evolve or incorporate appropriate controls into new products and services. A lack of resources and expertise devoted to BSA/AML risk management in some banks often compounds these issues.”

I have to say these conflicting messages troubled all three of us.

First, we all remain skeptical that MRAs are actually down, given the anecdotal information that formal criticisms (of all kinds) appear to be on the rise.

Also, with the risk increase mentioned above, what support will AML professionals receive from the government about the risks with new money laundering methods? Are banks and other financial institutions doing all of this in a vacuum? I certainly think that continues mediocrity in compliance.

The correct point regarding community banks getting more high-risk clients that they really cannot manage because large banks have “de-risked” their customer bases needs some guidance from the regulators—not just a calling out of the problem.

Note: I am not suggesting that OCC and others have not offered any suggestions or “guidance” on de-risking, but that that guidance does not seem to be slowing the activity. For example, a clear document on “controls” for new products and services would be greatly welcomed by the AML community.

Final point on the program with Rick and Dan (Rick from American Express and Dan from Ally Financial)—both are clearly facing the challenges many of you are dealing with and when asked about the very serious issue of personal liability, they offered their views (grist for another blog mill this summer) but said they are enjoy their jobs and how they (and all of you) make a difference in combating money laundering and financial crime—keeping mediocrity at bay.

[Editor’s note: Soto moderated a discussion panel at ABA’s Regulatory Compliance Conference recently where the issue of personal liability was addressed.)

Strong statement regarding human trafficking

It is refreshing to read government reports that compliment the AML community without caveat. One such report was released this month by the U.S. State Department. The Trafficking in Persons Report 2014 reviews country responses to the more than 20 million people impacted by human trafficking.

The report provides extensive detail and should be a must-read for all of us. In one section, the report points to the need for identifying irregular transactions and acknowledges the work of FinCEN in conducting a similar initiative, begun by the Manhattan District Attorney’s office with several major financial institutions to determine what “red flags” could be indicators of this horrific crime.

The institutions noted are Bank of America, American Express, TD Bank, JP Morgan Chase, Citigroup, Wells Fargo, and Western Union. It should also be mentioned that the Department of Homeland Security first developed the idea of working closely with the private sector in creating case studies and typologies to better equip all of the AML community to better understand how best to report financial activity that could be indicators.

All of the financial institutions involved are engaged in these projects because they recognize the societal impact of human trafficking. Their effort is not some regulatory response—again, keeping mediocrity at bay.