COMPLIANCE equate to an increased alert to SAR ratio . The operative word in the prior scenarios is “ should .” Oftentimes changing technology opens an AML program to increased risks from incorrect or incomplete data ingestion . Optimal tuning is critical to achieving desired output . In addition , to minimize the risk of regulatory scrutiny , all decisions and rationale regarding changing technology must be well-documented . “ With the vast amounts of information available to decision-makers , ‘ gut feel ’ business decisions are not sufficient to satisfy internal auditors or examiners .
Decisions must be supported with well-documented rationale and evidence and tracked to evaluate whether assumptions hold true initially and over time .” 8
That being said , there are certainly times when a financial institution with a solid AML program should consider investing in improved technology for the AML program such as when there is potential for an acquisition or the technology comes with additional controls ( e . g ., systemic checks of the required fields in suspicious activity reports or currency transaction reports to reduce errors ).
Industry-led change
Enforcement actions
Enforcement actions can be change agents . They are public documents available for study by BSA officers . Fines for program failures have increased over the last several years as has the reach of FinCEN ’ s enforcement activity . Financial institutions , casinos , MSBs and even a precious metals dealer have felt the effect of these actions . The content of enforcement actions can be a rich learning ground for BSA officers who may use them to modify their already satisfactory AML programs .
A static program is a program at risk
ACAMS initiatives
ACAMS and other trade and industry groups can influence change through their initiatives , classes and products that they offer . For example , some BSA officers have adopted the ACAMS risk assessment tool to use to create their risk assessments . Others have attended ACAMS conferences and learning events where they hear of tips and tricks of the trade , which becomes the impetus for change .
Industry best practices
Some contemplate changes to AML programs based on industry best practices . Take FinCEN ’ s new customer due diligence / beneficial ownership rule for which compliance is required by May 11 , 2018 . BSA officers are talking to each other and developing best practices surrounding the rule . As a specific example , although not required , some banks have included information on their websites to prepare their prospective customers for the ownership questions they may get starting on May 11 .
Changes in regulation / regulatory scrutiny
While obvious , we would be remiss if we did not point out a critical reason for changing an AML program and that is changes to the statute and / or other regulatory guidance . The aforementioned customer due diligence / beneficial ownership rule is a perfect example of a reason to change an AML program . FinCEN advisories , OFAC sanctions programs updates and special
measures are also all reasons for BSA officers to consider changing their BSA compliance program .
In addition to specific changes to the BSA , just in general , BSA / AML regulations receive seemingly constant scrutiny from a plethora of regulatory bodies . Some reviewers question whether BSA / AML is working to prevent money laundering ; others believe BSA compliance to be burdensome — particularly so on smaller organizations .
No matter the reason for the review , it is important for BSA officers to be aware of the reviews should they influence change on the current regulation .
Conclusion
The reasons to change a satisfactory AML program run the gamut and are important considerations for BSA officers . The risk of maintaining the status quo is that additional or other risks will have presented themselves since the program was evaluated . A static program is a program at risk . To paraphrase a quote from an unknown author : BSA officers must not be afraid of change — good controls may be eliminated , but better controls may be gained .
Amy Wotapka , CAMS , BSA officer , First American Bank , Vernon Hills , IL , USA , awotapka @ firstambank . com
Elaine Yancey , CAMS , MBA , managing examiner , Federal Reserve Bank of Richmond , Richmond , VA , USA , elaine . yancey @ rich . frb . org
The views and opinions expressed here are those of the author and do not represent an official position of the Federal Reserve Bank of Richmond or the Federal Reserve System .
8
“ AML Model Risk Management and Validation ,” EY , 2013 , http :// www . ey . com / Publication / vwLUAssets / EY _ - _ AML _ model _ risk _ management _ and _ validation / $ FILE / EY-AML _ model _ risk _ management _ and _ validation . pdf
ACAMS TODAY | SEPTEMBER – NOVEMBER 2017 | ACAMS . ORG | ACAMSTODAY . ORG 61