The sad truth behind last week's horrific attacks in Boston is that absolute prevention is impossible.
Fortunately, in order to break the case, investigators were able to take advantage of video cameras, cell phone records, and possibly financial transactions (we don't know that yet but it is a very real possibility), all items that some view as a limit on freedom.
Those of us in the AML community (private or public sector) understand why digital, electronic, or print records are so important to actually preserving freedom. But not everybody shares that point of view.
All of us want the freedom to move about where we choose, say what we want (even if it is wrong or uninformed), travel anywhere, and purchase without limit. A clear definition of "freedom" tells us that way of life is neither desirable nor possible.
With slander and libel rules, OFAC prohibitions, and some limits on purchasing weapons or narcotics, there are limits to living in a free society. Freedom also allows us to debate any of the limits mentioned--a situation not available to many in other countries.
Do we always appreciate the points above--no, not even close.
Some of you recall the "Know Your Customer (KYC)" debate of the late 90s. You may recall how close the AML regime came to being dismantled. Perceived violations of customer privacy and regulatory burdens ruled the day as impacting freedom but after 9/11 those issues disappeared. Since that time there have been ebbs and flows on AML oversight and we are currently in an environment where the regulators (with policymakers looking over their shoulders) hold the upper hand and criticism from the private sector is difficult to offer.
However, freedom should extend to an actual dialogue on ensuring that the records mentioned above are the best they can be and all parts of the AML community are working together.
More comments on AML deficiencies
Dan Stipano, a longtime friend and committed public servant, recently participated in a panel with me for the American Bar Association on AML issues and challenges.
Dan has always seen the AML issue from all sides--regulators, law enforcement, and the financial sector. When Dan speaks, I listen.
His assessment of the state of AML is that there are a number of factors that are the root causes of enforcement actions, regulatory criticism, and overall risk. In no particular order, he mentioned the weakness of a "culture of compliance" within financial organization--a situation that is hard to square with the years of focus on AML in the U.S. He also stressed the lack of commitment in some financial institutions of sufficient and expert resources and how information technology has challenged some and negatively impacted monitoring processes. A final root cause was unsound risk management.
All of these problems need improved corporate governance and Dan outlined how that can, and should, be accomplished. Among other things, the financial institution should have:
• A strong and effective BSA officer.
• Effective structure, including independence of officer and clear lines of responsibility
• Clear channels of communication to board and senior management
• Policies and procedures to ensure periodic updating of risk profile.
• A strong BSA/AML audit function
I would be remiss if I also didn't mention Dan's strong support for bank-bank information sharing and protecting the statutory "civil safe harbor" that is under attack from a court that clearly misreading the law--another element of "freedom"--freedom to be wrong.
April has been a sad month, as we have lost two longstanding members of the AML community.
• On April 5, we lost Ed Crowe, most recently the FIU Director at PayPal.
Ed had a long and distinguished career as a sanctions expert at MBNA, JPMC, and PayPal. An early supporter of ACAMS (certified in 2003), Ed was extremely helpful to our efforts to improve sanctions programming. Those that had the good fortune of working with Ed will remember his commitment to AML but most of all the kindness he showed everyone in the profession.
• The AML community lost another leader in April with the passing of Clemente Vazquez-Bello.
I had the honor of working with Clemente in the early days of money laundering prevention, while I was at ABA and he was Chairman of various committees and conferences of the Florida International Bankers Association. Clemente was a strong advocate for reasonable regulatory requirements on the financial sector while always supporting the most efficient ways of reporting crime to law enforcement.
We served together on Treasury's Bank Secrecy Act Advisory Group (BSAAG) and Clemente's active participation greatly enhanced the work of that group and many others he served on. He will be missed.
*Freedom is the title of a song by Richie Havens, who also died in April. His version of "Here Comes the Sun" was, for me, one of the best rock/folk songs from the 20th century.
Disclaimer: John Byrne's views do not necessarily reflect those of the American Bankers Association.
- The Department of Justice Increasing its Investigation into a Multi-Billion Dollar Money Laundering Scandal
- In 2020, Improve Your BSA/AML Program by Focusing on These 4 Areas
- Banks are Losing the Battle for Personal Loans: But Consumers are the Real Victims
- United States Fines Former Deutsche Bank Managing Director
- Adopting a Culture that Will Prevent Algorithm Bias