No Lookin Back*

Expansion of AML is not going to stop

Nor Should It

AML, just like technology, started slowly but in the past 5-10 years has either rapidly increased or challenges have appeared that we need to address.

For example, the recent FATF Plenary issued a strong statement on “virtual assets” and concluded, among other things that:

“All countries are encouraged to swiftly take the necessary steps to prevent the misuse of virtual assets. Given the speed of innovation, and to ensure that the FATF Standards remain relevant, the FATF will review its standards as they apply to the virtual asset sector in 12 months.”

We all know that virtual currency isn’t going away and now governments are being pressured to act. The question is will it be accomplished efficiency and correctly?

This announcement, the recent conclusion of the 17th Annual ACAMS Vegas program, and a program I attended on art and money laundering continues to make clear both how much AML changes as do our responsibilities as members of that community to stay focused on changes we want and those we may not yet desire.


Polls from the ACAMS Conference—how we really feel

When I was at ACAMS, we began the use of polls in many sessions to take a temperature check on how the community believed things were going. Detailed surveys from other firms, of course have value but these questions, asked in a setting that is anonymous and no time for extensive thought, are often as valuable for understanding where we are at a certain point in the compliance year. Also, since all can respond (regulators, law enforcement and the private sector), the answers do reflect a complete view of the entire AML community.

Attendees, during the regulatory panel, were asked what were their biggest challenges. With over 600 responses, almost 38% said resource allocation. Second and third were close, with corporate culture and information sharing being the next hurdles. Information sharing makes sense, but I am concerned that many listed the compliance culture of the organization. One wonders if the toxic environment we are in regarding regulation has pushed some leaders to downplay the importance of what we do.

One contrary data point came in a few days later at another panel where the attendees lauded senior management for “getting it” regarding preparing for exams. I’ll leave to others to figure out the apparent disparity in those responses. The enforcement panel also had a strong showing of corporate culture so who really knows?

There was also discussion throughout the conference on AML reform proposals (at least in the US), and we asked attendees what should be a priority. The closest and highest percentage of responses were for regulatory expectations to be clarified, and technology and innovation to be encouraged.

The good news is that the regulatory leadership appears to agree. Here’s hoping they invite the private sector to any discussions on reform.

A few more responses of note include close to 60% indicating that there are examples of examiners being inexperienced and not up to speed on the FFIEC “requirements.” (note: I probably would have reworded that question to ensure what is meant by a requirement, but the response is certainly useful in the perception of “inexperience”)

A final poll response that was baffling, found that 73 attendees were “too busy” to read enforcement actions. Seriously folks?

Make the time and even use the enforcement themes to train and improve your institution.


The debate against AML responsibility gets silly

Finally, I had a unique opportunity to attend and participate in a program to discuss the question of the art market and money laundering; a topic in which I certainly am not an expert, but learning as I research and discuss with others. The benefit and curse of being in AML for over 35 years is that I have heard every argument against having obligations to detect, report and/or prevent financial crime from the private sector. At this program, all the old saws came out: burden, cost, premature, lack of evidence and why anyone other than law enforcement should have a reporting obligation. What is new now are the attacks on FinCEN (making up facts about how enforcement occurs), those that advocate a policy change, and anyone not on their side—sound familiar?

Also new now is Twitter and “organizations” using three or four created accounts to seem like there is broad support for your position—-but I digress…

To those of you in real estate, law, art or auction houses, virtual currency and other new “possible” vehicles to move illicit funds, you would be better served working collaboratively so as to avoid inefficient regulation. The AML community decided after 9/11 and other horrific attacks that we should work together (many decided long before that I would add) and if you have a financial footprint you need to report actions of unusual activity.

Those of you on the outside realize there is no lookin back…


*A 1985 hit co-written by former Doobie Brother Michael McDonald and Kenny Loggins from the album of the same name. Both artists covered the song on their respective albums.