“Jojo left his home in Tucson, Arizona, for some California grass” *
—The Beatles, “Get Back”
“But what bank took the money?”
The AML compliance field just continues to get more complicated, challenging, and, as a consequence, more interesting.
Virtual currency, FATCA, use of “Big Data” (whatever that is), human trafficking, and now trying to figure out how to handle marijuana purchases in several states all have the same theme—there will be no certainty (or anything close to transparency) without an AML community-wide solution.
Specifically, with constant fear of excessive regulatory expectations, personal liability now a reality, and the promise of more enforcement actions …
Why would any compliance officer recommend entering into a higher-risk area?
Clearly a muddled picture
You cannot fault government representatives for trying to respond to confusion in the community. But the days of guidance providing formal comfort without statutory or regulatory change are long gone.
There remains a lack of, dare I say it, trust. Frankly that was not an issue when some of us began in AML many years ago.
This fear is neither misplaced nor focused on one agency or area. I believe it reflects an environment that is confusing and that, from my perspective, misses the overall goal of AML and financial crime—to deter and disrupt criminal activity.
Let’s look at the recent FinCEN guidance on serving marijuana businesses.
First, FinCEN references the so-called “Cole Memo” from the Justice Department that contains a litany of factors DOJ will consider prior to prosecuting cases related to the sale or use of marijuana. There is frequent mention of “congressional intent” regarding the enforcement of the Controlled Substances Act.
Is there anyone out there willing to base compliance on “congressional intent,” knowing how Congress can change with the wind?
So, the compliance community should take no solace in having DOJ cite congressional direction.
Next, how is the guidance crafted? Here is an introductory paragraph.
“In general, the decision to open, close, or refuse any particular account or relationship should be made by each financial institution based on a number of factors specific to that institution. These factors may include its particular business objectives, an evaluation of the risks associated with offering a particular product or service, and its capacity to manage those risks effectively. Thorough customer due diligence is a critical aspect of making this assessment.”
All of you should read the rest of the guidance (as you should all AML-related guidances) and the various subcategories of “marijuana” SARs and try to craft a program around these types of activities.
Think it through
No issue with the statement from FinCEN. But, again, with a few states legalizing an activity that is prohibited under federal law, what would make a professional compliance officer in 2014 recommend that their financial institution could manage such a risk?
As we used to say in the 70s when someone was contemplating a rather strange line of reasoning—“What, are you high?” (couldn’t help myself)
The issue is not funny.
But sometimes you do wonder.
The last line of the guidance is worth repeating:
“FinCEN’s enforcement priorities in connection with this guidance will focus on matters of systemic or significant failures, and not isolated lapses in technical compliance.”
Can we get this in writing from everyone responsible for AML compliance oversight?
A reasoned approach—Is it possible?
No decision gets taken in a vacuum. Many bankers have reached out to me and said there is no chance they will bank marijuana businesses in this atmosphere. But they remain concerned—because they care about their communities—that the monies may go underground or to fund other criminal activities.
An ACAMS poll showed that close to 50% of the respondents believe that the FinCEN guidance simply further confuses the issue.
A Midwest banker sent me this:
“And here we have the federal government telling us how to do business with illegal businesses while other parts of the same federal government are going after us for doing business with legal businesses in payday lenders. ‘Go ahead and bank the illegal businesses but don’t you dare do business with legal businesses we don’t like at the moment’. ”
Not saying I agree with the point—but the sentiment cannot be ignored.
Trust is important for bankers and when they lose it with their customers it becomes difficult to get back.
All parts of the AML community have much work to do. No guidance, no matter how well-conceived, will address concerns that continue to linger.
We need that AML Summit!
* “Get Back” was one of the last songs released by the Beatles and was famously sung on the rooftop of Apple Studios at the end of Let It Be.
- Escape to America: Borrowers Seeking Refuge Through Chapter 11
- Why AI is the Only Option for Combating Money Laundering, Terrorist Financing and Other Illicit Financial Threats
- Lessons Learned: What Other Countries Can Teach the U.S. About Open Banking
- Fighting the War Against Financial Crime: Without Proven Weapons, the Repercussions Can Be Severe
- Large Banks Likely to Focus on Small and Midsize Bank Acquisitions