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From Banking and Finance Law Daily, August 12, 2014

Anti-money laundering compliance begins with strong leadership

By Lisa M. Goolik, J.D.

Reacting to recent civil and criminal enforcement actions against banks for Bank Secrecy Act/Anti-Money Laundering shortcomings, the Financial Crimes Enforcement Network has issued an advisory to highlight general principles illustrating how financial institutions and their leadership may improve and strengthen organizational compliance with Bank Secrecy Act (BSA) obligations through a culture of compliance (FIN-2014-A007, Aug. 11, 2014).

Background. According to FinCEN, recent enforcement actions have affirmed that the culture of an organization is critical to its BSA and anti-money laundering (AML) compliance. FinCEN has identified general lessons from these actions that may be instructive to the leadership of all financial institutions required to comply with the BSA. Financial institutions should consider how to incorporate the guidance “in a manner that is commensurate with their risk profile and business model.”

Culture of compliance. As a result, FinCEN advises that a financial institution can strengthen its BSA/AML compliance culture in the following six ways:

  1. Leadership should be engaged. For a BSA/AML compliance program to be effective, FinCEN advises that the financial institution should have the demonstrable support of the leadership (as appropriate based on the financial institution’s size and structure). The institution’s leaders should also receive periodic BSA/AML training that is tailored to their roles. In addition to supporting a culture of compliance, an appropriate understanding of BSA/AML obligations and compliance will help an organization’s leadership make informed decisions with regard to the allocation of resources to the BSA/AML function.

  2. Independent of revenue interests. Compliance staff should be empowered with sufficient authority and autonomy to implement an institution’s AML program. An institution’s interest in revenue should not compromise efforts to effectively manage and mitigate BSA/AML deficiencies and risks, including submission of appropriate and accurate reports to FinCEN. An effective governance structure should allow for the BSA/AML compliance function to work independently and to take any appropriate actions to address and mitigate any risks that may arise from an institution’s business line and to file any necessary reports, such as Suspicious Activity Reports (SARs).

  3. Information should be shared throughout the organization. In several recent enforcement actions, the institution had relevant information in its possession that was not made available to BSA/AML compliance staff. This may have resulted from a lack of an appropriate mechanism for sharing information, a lack of appreciation of the significance or relevance of the information to BSA/AML compliance, or an intentional decision to prevent compliance officers or staff from having access to the information.

  4. Leadership should provide adequate resources. For a BSA/AML program to be effective, the institution should devote appropriate support staff to its BSA/AML compliance program based on its risk profile. Appropriate technological resources should also be allocated to BSA/AML compliance, allowing financial institutions with a higher risk profile to utilize automated systems for identifying and monitoring suspicious activity.

  5. An independent and competent party should audit the program. An effective BSA/AML compliance program also includes a proper ongoing risk assessment, sound risk-based customer due diligence, appropriate detection and reporting of suspicious activity, and independent program testing. A financial institution’s leadership should ensure that the party testing the program is independent, qualified, unbiased, and does not have conflicting business interests that may influence the outcome of the compliance program test.

  6. Understand how BSA reports are used. Leadership and staff at all levels in a financial institution should understand the purpose that BSA reports serve and how the information is used. The reporting that financial institutions provide is used to: serve as tips to initiate investigations; expand existing investigations; promote international information exchange; and identify significant relationships, trends and patterns.

“The reporting and the transparency that financial institutions provide under FinCEN’s regulations result in some of the most important information available to law enforcement and others safeguarding the nation,” FinCEN concluded.

MainStory: TopStory BankingOperations BankSecrecyAct

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