“Easy to be Hard”*

Having just returned from our ACAMS 20th Annual AML & Financial Crime Conference, the messages were both clear and mixed—if that can be possible.

On the clear side, we released a survey with Dow Jones—2015 Global Anti-Money Laundering Survey Results—that found increased regulatory expectations; need for improvements to trained staff; and updated technology to all be challenges for the AML community. 

Polls taken during the sessions told us that the private sector craves more intelligence to stop and detect terrorist financing and a broad array of other financial crime; that boards of directors are not as engaged in AML as needed; and only 24% said that their AML controls were not well suited to identify the financing of terrorism.

So you have a sense of where banks must focus to make improvements.

What we heard from the feds

More solid messages and themes came from government representatives. Among them: Adam Szubin, the Acting Under Secretary for Terrorism and Financial Intelligence, and recipient of ACAMS 2015 AML/CTF Government Leadership Award.

In his speech, Szubin told us that , “This spirit of  [private-public sector] cooperation is more important now than ever, because the threats we face together have grown more sophisticated.”  

In addition, Rich Weber, the head of the IRS Criminal Investigation Division, thanked the community for their cooperation and SAR filings. FDIC’s Lisa Arquette pointed out the very low number of financial institutions that were subject to formal enforcement actions of any kind.

When these public servants offer support for the AML community, it is a very good sign, despite the headlines.

However, much more work remains to be done!

De-risking controversy continues

It’s always refreshing to hear the community being encouraged and congratulated. However, the ongoing communications on so-called “derisking” continues to confuse and challenge clear thinking.

One of our polls found that 26% of examiners have cautioned financial institutions about derisking and the Dow Jones survey surprisingly discovered that almost 40% of respondents may actually exit money service businesses (MSBs) relationships in response to a FinCEN guidance that was designed to lend clarity on how to keep those accounts.

Nearly a third of all of the sessions at the conference discussed derisking in some fashion.

Some particularly compelling points during the conference:

• FBI representatives expressed concern that exiting of some high-risk accounts could result in a dangerous increase in movements of illicit funds.

• Community bankers feared an inability to provide resources to perform due diligence on these accounts.

• The MSB community continues to bemoan the ability to have banking relationships—a full 10 years after meetings and focus on this problem.

So, with law enforcement expressing concern, some other parts of the government worried about inclusion of certain categories of entities in the traditional financial sector and banks pointing out a need for regulatory certainty.

Shouldn’t we figure out a way to fix this?

“Easy to be Hard”

The conference started with several messages from Department of Justice Assistant Attorney General Leslie Caldwell.

One major point that was certainly embraced by the audience related to the governance culture within an institution. The Assistant AG said:

“The people who are responsible for compliance should have stature within the company.  Compliance teams need adequate funding and access to necessary resources.”

A very essential point in these times of potential personal liability.

Despite additional messages regarding being straightforward with the regulators, there were no corollary comments about regulators being straightforward with the regulated. Further, the undisputed need for clear communications of compliance policies throughout an organization was covered. The last portion of the speech ended on this note:

“Simply put, banks and other financial institutions continue to come up on our radar screens because they, and the individuals through which they act, continue to violate the law, maintain ineffective compliance programs, or simply turn a blind eye to criminal conduct to preserve profit.  If the government learns of such action (or inaction), it is our obligation to investigate and follow the evidence wherever it may lead.  And we will prosecute banks and other financial institutions for willful failures to maintain effective anti-money laundering programs and for other financial crimes. “

Really?

The use of “turning a blind eye” twice in one speech in 2015 is disheartening to all of the AML professionals who try to get it right and view their work as a passion, not simply a job.

Fortunately, there were many encouraging comments from all elements of the AML community and there will be a renewed push to emphasize all the value that the private sector provides, as well as the many instances of active partnership with those enforcing or overseeing the laws.

Shouldn’t be so easy to be hard…

*1969 hit from Three Dog Night and covered many times over the years.