Although Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations have been around for some time, firms still struggle with effectively operationalizing their organizations in a manner which is both regulatory compliant, as well as customer-friendly.
Furthermore, regulatory pressures specific to AML have only increased with a number of recent substantial fines and investigations. AML Compliance, Know Your Customer (KYC), and sanctions requirements are continually an area of focus for management as financial institutions have to ensure the appropriate regulatory compliance is achieved.
Unlike in other regulations like BASEL, the regulators do not discern between “Big Banks” and Regional Banks. All financial services institutions are held to the same standard and the unfortunate news is that the regulators are focusing more than ever on the Regional Bank.
Financial institutions must make difficult decisions in the most effective manner to comply with BSA & AML obligations, while not driving away their customers. This includes:
- How to effectively organize and enable the 1st, 2nd, and 3rd lines of defense
- Taking a centralized view of the customer and relationship and breaking the traditional product relationship or “siloed” approach; one customer can have multiple relationships with a financial institution… but it’s still one single customer!
- KYC and its Ultimate Beneficial Owners (UBOs)
- Employing a risk-based approach to appropriately perform due diligence, or enhanced, due diligence depending on Customer Risk Rating
- Appropriately identifying and implementing controls and mitigants
- Reviewing the customer relationship periodically over the lifetime of the relationship in order to assure current and accurate understanding of its customers
- AML Compliance Program Monitoring and Surveillance and AML Program Testing
- How to deal with and report on both unusual activity and suspicious activity
A lack of demonstrable controls and progress can result in:
- Criminal and civil prosecutions
- Significant fines and liability
- Regulatory censure
- Required look back reviews and remediation of data
- Imposed oversight of management from independent bodies
- Reputational harm & attrition