Softer Regulatory Enforcement? Maybe Not for AML

Deterring money laundering and the flow of terrorist funds through U.S. banks will be a top supervisory priority this year, even as the Trump administration explores easing regulations and softening oversight in the banking industry, panelists at a recent RMA New York chapter event said. 

Considering this, institutions would benefit from continuing to fortify their AML programs to stem the flow of illegal funds and to comply with tough Bank Security Act mandates. While maturing processes and safeguards is an endless effort, the panel’s experts and leaders agreed that these actions are the building blocks of any successful AML approach: 

• Setting clear policies, processes, and responsibilities 

• Building an effective Know Your Customer (KYC) capability 

• Keeping up with regulatory changes in different jurisdictions 

• Wisely applying technology, including artificial intelligence, to tasks like customer research and transaction monitoring 

• Hiring specialists with topical expertise 

• Conducting regular audits of AML programs and focusing on continuous improvement 

Setting Clear Policies 

Processes and compliance controls should be spelled out and transparent, said Jeff Hood, vice president of global compliance at Input Output Global, a technology company well known for the Cardano blockchain platform. That includes clearly assigning responsibilities, so each stakeholder understands their role in the program. 

Building KYC 

Understanding the customer, their business, their relationships, and their activities over time can help limit exposure to AML hazards. The more an institution knows about a customer, their associations, and their financial habits, the more likely it is to spot unusual or suspicious behavior. Though artificial intelligence can’t offer an end-to-end solution for KYC today, it can help with essentials like collating information into a single source of truth and finding related entities.  

Keeping Up With Regs 

Staying on top of new and proposed regulations is of course a compliance necessity—but it can also help with adapting processes and policies without delay and in spotting potential compliance gaps. 

Wisely Applying Technology 

AML programs require significant identification capabilities and near-100% deterrence. Applying advanced analytics and technology may not be much of a differentiator in an AML practice because of the diversity of money-laundering scenarios, said Varig Masuraha, managing director, financial crime, at Bank of America. The nature of the risk can be different at every institution, he said, and the benefit of using technology is not always apparent when compared with the cost of implementing it. Still, technology can help with tasks like identifying false positives, cutting down on investigative time. 

Hiring Specialists 

Cursory compliance training isn’t enough to raise awareness of AML dangers. Staff members need custom training from knowledgeable specialists, said Daniel Viola, a partner at the international law firm Seward & Kissel. “It needs to be more focused—bringing in experts to talk about it.” 

Conducting Regular Audits 

Those successful at maturing their AML programs constantly monitor their customers and transactions and conduct regular audits of their program and its controls. They use their findings regularly to improve their operations. 

Ultimately, diligent AML oversight is not just about satisfying regulators; lapses threaten business. “What you don’t want is to have that headline risk, particularly because you don’t want your customers to think you have challenges from a financial or regulatory standpoint,” said Daniel Campbell, managing director at ACA Group, a governance, risk, and compliance consulting firm to the financial services industry.