The continuing evolution and increasing complexity of anti-money laundering (AML) laws and regulations have made AML compliance a high priority for both financial institutions and nonbank financial institutions (NBFIs), such as insurance companies and trust companies.
Often used to facilitate drug trafficking, terrorism and other crime, money laundering can also negatively impact the global economy: According to the United Nations Office on Drugs and Crime, the estimated amount of money laundered globally annually is 2 to 5 percent of global gross domestic product (GDP), or up to US$2 trillion.
Financial institutions and NBFIs often engage AML compliance specialists to help them review their AML compliance efforts and confirm that they are meeting requirements that apply specifically to their business. Financial institutions also rely on these resources for support after regulators ask them to perform a “lookback” — a transaction review of historical activity that can extend back several years. Lookbacks can be time-consuming and costly and are often the result of regulators identifying a deficiency in a transaction monitoring system or issuing an enforcement action.
Concerns about increasing regulatory scrutiny, compliance burden
Some financial institutions are opting to conduct lookbacks proactively to assess AML compliance deficiencies and make improvements before they are flagged by regulators. The decision to take a proactive approach may stem from growing concern about increasing regulatory demands. If an organization can demonstrate that it has a well-designed and effective AML compliance program, it can potentially satisfy regulators and avoid an investigation and penalties.
Financial institutions are not alone in their concern about intensifying regulatory pressure. Research for the fourth annual “Executive Perspectives on Top Risks Survey” from Protiviti and North Carolina State University’s ERM Initiative shows that business leaders across industries view regulatory issues as a top risk for 2016. They expressed concern that heightened regulatory change and scrutiny may noticeably affect the manner in which their companies deliver products or services.
In addition, a majority of U.S. and Canadian firms surveyed for our latest Benchmarking the Accounting and Finance Function report, which we developed with the Financial Executives Research Foundation (FERF), said they expect their compliance burden to rise over the next three years.
AML compliance assessments: example results
Whether an organization decides to proactively review the effectiveness of its AML compliance policies and practices, or is instructed to do so by regulators, the effort not only can help the business verify that it is meeting all necessary regulatory compliance requirements, but also provides an opportunity for the organization to mitigate risk.
Faced with ongoing mandates, firms frequently turn to consultants to provide specialized expertise in this area. This was a strategy that helped the financial services institutions below with their AML needs:
Case study: AML compliance and Know Your Customer (KYC) review
An institution requiring assistance in completing a due diligence investigation and research related to AML compliance, the USA PATRIOT Act and Know Your Customer (KYC) standards requested support in project management of file screening, review and execution of work logs, and documentation of results determining the validity of their clients’ information.
We provided a team of specialized consultants who helped to conduct AML and Office of Foreign Assets Control (OFAC) risk assessments and formulate recommendations that would enhance the financial institution’s overall KYC process. Our team completed a thorough review of the bank’s records, which had been backlogged. Because of this review, the financial institution was able to meet all necessary AML compliance requirements, as well as mitigate risk and avoid penalties.
Case study: AML compliance
After integrating with another bank, an institution faced a large number of unexpected suspicious account alerts. The integration had increased the bank’s size substantially, and it did not have adequate resources in-house to handle the volume of suspicious activity reports (SARs), investigations and AML compliance activity.
To address the backlog of SARs, the bank engaged a team of specialized consultants from Robert Half Management Resources with experience identifying, researching and analyzing money-laundering tactics and knowledge of the USA PATRIOT Act, the Bank Secrecy Act (BSA), and KYC guidelines. The team’s swift and accurate work led to the bank receiving a clean review from the Office of the Comptroller of the Currency (OCC) and realizing significant cost savings.
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More AML resources
For answers to a comprehensive list of frequently asked questions about AML compliance, laws and regulations, see the latest edition of the Guide to U.S. Anti-Money Laundering Requirements from Protiviti, a Robert Half subsidiary. To download this resource and access other AML-related publications from Protiviti, go to the Anti-Money Laundering page on its website.
Also, visit The Protiviti View blog to read the post “From New York to Hong Kong: The Need for a Global AML Program” for an overview of the challenges global financial institutions face when seeking to establish and maintain an effective, global AML compliance program. For more in-depth coverage on this topic, download Protiviti’s white paper, The Challenges of Managing a Global AML Program.