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In his second article Justin Muscolino, Senior Compliance Training Consultant, continues his thoughts on AML and what the future holds moving into the new year.
We all know how difficult the current environment has been to deal with this year. With major cities worldwide still in lockdown and many corporate staff continuing to work remotely, there are arguably fewer opportunities these days to have face-to-face conversations or regular meetings just to check in with your staff, to see how they are going, and to ensure that they are still meeting their professional obligations under the relevant company policies and regulatory requirements.
Controls, policies and procedures, work quality, and hours of operation have almost inevitably undergone major changes this year. In this environment, we need to be very conscious of the compliance risks our organizations are liable to encounter.
Yet many of us feel that we are somehow going to get a free pass from regulators, who will supposedly overlook transgressions because 2020 itself has been such a transgressive year.
Is this something you would want to bank on? I would not. If I am correct, lax attitudes to compliance may result in member firms facing more, not less, regulatory action.
When it comes to the risks posed by money laundering, you must ask yourself:
• Are all the required identity and background checks being performed?
• Are firms filing timely SARs (Suspicious Activity Reports) when appropriate?
• Is ongoing monitoring of accounts still occurring at the same frequency?
Tom Cardamone, Managing Director of Global Financial Integrity, a Washington-based organization that tracks illegal money flows globally, has said that there are “clients so bad that numerous SARs are being filed about them, but no one ever does anything about it.”
This statement worries me. If banks fail to perform this basic, regulated activity, what else are they not doing? What other areas lack their proper attention?
In my experience working for financial institutions, the root cause for this sort of failure usually involves serious deficiencies in an organization’s compliance culture. Many factors can lead to a poor compliance culture, such as poor employee morale, high turnover of staff, or supervisors not keeping track of their staff. We can easily imagine how problematic a compliance culture can become in our current environment.
Going back to money laundering, Dan Stipano, Partner at law firm Buckley and former OCC Deputy Chief Counsel, said it well:
“Filing SARs is not a get-out-of-jail-free card,” he said. “Many banks have faced major enforcement actions after having filed many SARs if they failed to take the appropriate action on their clients. SARs don’t cover your back necessarily.”
We can’t go through the motions without having internal procedures in place that are based on the financial institution’s risk profile. There is more risk in this current environment than ever before.
The question is, what should we do to stay on track and complete all the necessary regulatory steps?
1) Check your policies and procedures and make sure they are up to date.
2) Check that your staff training is still occurring. Do not simply do the bare minimum in this environment, because if staff fail to stay up to date on particular topics or are new to the field, potential problems will only get worse.
3) Figure out an approach or strategy with your team or staff. Conduct video enabled meetings at the same frequency (ie weekly, biweekly). Make time and space on your agenda to teach on a specific function, task, or responsibility.
Since we cannot know for sure when things will improve in our current environment, we need to stick to what we know and do best, by continuing to perform our roles to the best of our capacity. Failure to do this, especially when it comes to anti-money laundering programs, could lead to penalties for us and our organizations, and result in a heightened exposure to risks.
Continue doing your assigned training and look out for any red flags that suggest an action needs to be escalated. AML training should cover not only SARs but also each phase of AML. This will help guide you on what to look for and what to escalate.
Anti-Money Laundering - covering the responsibilities of financial services and other businesses in general
In this article, Thomas Fox, Compliance Evangelist based in Houston, TX, addresses the question, "What if you want to take your post-training analysis to a higher level and begin a more robust consideration of the effectiveness of compliance training?"
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