Why BSA/AML risk assessments are more important than ever

Mar 17, 2017 8:44:06 AM

Pete Griffith

Money laundering is in regulators crosshairs.
Money laundering is in regulators crosshairs.

Global spending on anti-money laundering (AML) compliance may reach $8 billion this year, according to a study by PwC. The investment growth stems from increased money laundering in the past few years, an issue that has been amplified by recent events:

  • The Panama Papers: The leak of 11.5 million files exposed rampant money laundering, which deeply affected regulatory bodies internationally. The EU's European Commission, for example, recently announced intentions to tighten AML rules in response to the Panama Papers. 
  • Global attentiveness to AML: The Financial Conduct Authority (FCA) fined Deutsche Bank $199 million in February for not maintaining an adequate AML control framework. This is the largest fine ever imposed by the FCA. Just prior to this, the Standard Charter Bank in Singapore was fined $5.2 million, also for failings in AML and customer due diligence (CDD) which resulted in money laundering.
  • Terrorist financing: Greater enforcement of AML and combating the finance of terrorism (CFT) are creating compliance challenges for even the most advanced financial institutions, according to PwC. Even so, AML and CFT continue to be top priorities among governments worldwide. 

The combined effect of these events is a more intensive regulatory focus on The Bank Secrecy Act (BSA) and AML. This in turn puts significant pressure on banks and credit unions to manage BSA/AML compliance more effectively in the coming years.  

CUNA, FinCEN and others home in on BSA/AML

"The clock is already ticking."

In the U.S., the heightened global focus on BSA/AML has manifested in several ways. 

The first is the release of a new BSA/AML self-assessment tool by the Conference of State Bank Supervisors (CSBS). The tool is a spreadsheet that attempts to address "uncertainty surrounding BSA/AML compliance and support more transparency within the financial sector." The assessment does this by helping financial institutions organize their BSA/AML risk management efforts in a customizable format. 

The second is the Department of the Treasury's Financial Crimes Enforcement Network's (FinCEN) new CDD requirements. They were first announced in May 2016. Financial institutions must comply with them by May 2018, so the clock is already ticking.

The third is the National Credit Union Association's "renewed vigor and focus on BSA/AML," which was a hot topic at the 2016 CUNA Bank Secrecy Act Conference in November. One speaker noted that the burden of BSA compliance is weighing heavily on the shoulders of credit unions. But the alternative, non-compliance, simply isn't an option. 

Last but not least, The Trump Administration may actually tighten BSA regulations. Despite hope for more regulatory breathing room, Law360 pointed out that the administration is making national security a greater priority. This could precipitate more rigorous enforcement of BSA regulation, especially in regard to CFT.

New CDD regulation is imminent.New CDD regulation is imminent.

Building a better framework: Is technology the answer?

To summarize, banks and credit unions are facing head winds from three sources:

  • New rules for CDD.
  • The strong possibility of greater enforcement for BSA/AML in the coming years. 
  • The very real threat money-laundering poses to an organization's reputation.

AML compliance managers are hereby left with the challenge of creating a strong but adaptable AML framework. Bear in mind, the entire organization is woven into this AML framework. New assessments like the CSBS's can help, but they can't address the more systemic problem: legacy IT compliance systems that lack integration with day-to-day business operations.

As International Banker pointed out, "the kinds and volumes of customer information required under the new CDD rule" inevitably complicate an already complex data management endeavor. To build a more successful BSA/AML framework in 2017, every institutional role and responsibility must be a part of daily risk management efforts, and so must customers and vendors.

Now more than ever, financial institutions need a cost-effective way to define roles in an AML framework and refine the responsibilities within those roles. From here, they must be able to build meaningful, data-driven reports that can be communicated to, and analyzed by, senior management. And finally, for this to be possible, users require an interface that allows for everyday management of risks.

Since 2008 Supernal Software has provided institutions with web-based tools that organize the BSA risk assessment and auditing procedures. From pre-built templates, to email reminders to logical workflows, you can rest assured that you have a system to get your work done and find the information you need. For more information on how Supernal's BSA risk management software works, click here to contact us to arrange a thorough demonstration.

Topics: Compliance, Financial Institutions, Banking

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