AML/CFT Industry Standards and Best Practices Group

Background and History

Since January 2005, there have been numerous news articles concerning the lack of guidance on the Bank Secrecy Act (BSA) and other Anti-Money Laundering regulations.  Many in the private sector believe that the enforcement and examination of their efforts to prevent money laundering are inconsistent.  On the other hand, the Financial Crimes Enforcement Network Director William Fox notes that his agency is equally concerned about the inconsistencies in the regulations.  Industry observers contend that the rules and their enforcement are disproportionately affecting smaller firms, forcing them to sell their assets to larger institutions. Letters sent to various regulators have recommended a joint training session for bankers and examiners on the BSA and other similar regulations, centralized guidance from the agencies, and an open dialogue with industry about the rules as well as standards and practices.  Moreover, joint steering groups are rapidly becoming emerging best practice for AML regimes and have to date proven immeasurably valuable to the jurisdictions in which they operate.

THE FOLLOWING IS FOR DISCUSSION PURPOSES:

Purpose and Scope

The purpose of the AML/CFT Industry Standards and Best Practices Group (Group) is to establish a leadership position in brokering an understanding between the regulators and the financial industry.  The Group would contribute to both compliance, regulatory and law enforcement efforts. This would be done by analyzing and publishing current trends and emerging issues regarding the ways by which the financial sector is working to comply with US and International regulatory requirements (this would be industry and size specific). The scope might also include working with the government agencies to help them to understand where the perceived inconsistencies of enforcement exist.

Benefits of Participation

  • An opportunity to participate in establishing a set of exemplary compliance program methods, which may be defined as:

Continuously improving processes

Activities and programs that are in keeping with the best possible evidence about what works in a particular context, e.g., small banks, large MSBs, NASD member firms, etc.

Compliance practices and work processes that lead to superior audit results

Strategies, activities, or approaches that have been shown through research and evaluation to be effective.

  • Giving members an opportunity to interact with players whom they might not have access to otherwise, e.g. government, etc.
  • Members gaining access to processes that have the implicit approval of the entire BSA examiner’s staff.
  • Access to information that would provide a guiding, practical application of identified best practices that may reduce both compliance AND operational risk for members’ firms.

Goals

  • Conducting typologies to define the processes, practices, and systems identified in AML compliance that perform exceptionally well and are widely recognized by a majority of institutional players and their regulators as improving financial institutions’ performance and efficiency in BSA compliance.
  • Liaising with government agencies and the financial services industry to foster a “we’re all on the same side” atmosphere, especially as it concerns the sponsoring organization’s members.
  • Conducting a benchmarking exercise that will provide the sponsoring organization’s members effective access to actionable information, as well as giving members an opportunity to participate in a large scale exercise to set the agenda with regulators on equal terms with the financial industry.
  • The Group might be organized by a board, committees, subcommittees, that would be further organized by (for example):

Type of institution, e.g., Bank, MSB, etc.

Size of institution

Size of compliance budget

Size of compliance staff

Dedicated staff

IT compliance, including:

System usage

System analysis

System architectures

Data analysis (e.g., quality)

  • All analyses would be refined by specific attention to compliance methods for specific regulations, for example:

Transaction monitoring

326 procedures

313 procedures

314a/b procedures

Suspicious activity detection and reporting

Documentation standards (format, etc)

Regulatory response management

Training and Education

Financial Intelligence Unit (FIU) activities

Others.

Operating Costs

There would be minimal costs incurred by the sponsoring association to organize this Group.  The Group could be promoted through a newsletter and/or website and have special meetings for Group members/committees during a regular annual meeting.  Minor expenses for organizational duties would be covered by the sponsoring association.

Revenues

The results should be free to participating firms/members, but could be marketed and sold to other interested parties.  Sponsorships for the study could potentially be solicited as well.

Leadership

Kenneth L. Bryant and Howard Steiner have volunteered to co-Chair the Group and work with the sponsoring association to organize sub-committees.  The committees will obtain data through surveys.  Data obtained through survey responses will be kept in strict confidence with limited access by any outside party.  The sub-committees will construct the surveys in order to provide information firms can use to evaluate their own efforts and provide a measure of progress toward increased automation and common compliance standards.

Moving Forward

The idea of the AML/CFT Industry Standards and Best Practices Group is the brain child of Ken Bryant of Bryant & Associates and Howard Steiner of Impact AML.  We are currently seeking a professional association to provide sponsorship of the Group.  We are pleased to announce that effective September 1, 2006, we have agreed to develop the Council of Standards and Practices for the National Money Transmitters Association.  In addition, if anyone is interested in participating as a Committee Chair or Member, please don’t hesitate to contact us.  We welcome and appreciate your interest!

UPDATE December 2009

Due to a lack of industry support, consensus and particpation, the effort on behalf of the National Money Transmitters Association was discontinued.

UPDATE June 2010

Howard Steiner of ImpactAML has taken a full time position and can no longer contribute to the group at this time.

UPDATE December 2011

We have received some interest in compiling industry standards and best practices for Suspicious Activity Reporting (SAR) Investigation Units.  We are exploring the feasibility of a platform for the receipt and dissemination of the results of the output, such as a Wiki or within a LinkedIn group.  If you have any interest, please don’t hesitate to contact us.

UPDATE January 2012

We were startled to find that although Suspicious Activity/Transaction Reporting is the cornerstone of the Bank Secrecy Act (BSA) in the US and indeed of all Anti-Money Laundering (AML) regimes around the world, there was really no established or published industry standards, guidelines or best practices for Suspicious Activity Reporting.  Moreover, at the risk of starting yet another Linked In group, research was conducted and we were surprised to find that there was no such group already dedicated to the topic.  We found the same was the case for Enhanced Due Diligence (EDD) and for Sanctions Compliance (from a purely screening and interdiction standpoint).  To that end, we have started and serve as a co-moderator for the following specific groups on Linked In to discuss and share ideas within the respective topics:

Suspicious Activity/Transaction Report Investigation Units

Enhanced Due Diligence

Sanctions Compliance

Please don’t hesitate to send a request to join the group and contribute if you have some expertise in this area.



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