On April 25, 2013 the U.S. Senate Caucus on International Narcotics Control said bankers presiding over AML failures should be prosecuted.
The Senate Caucus’ view on existing money laundering enforcement, regulations, and laws are spelled out through nine recommendations in, “The Buck Stops Here: Improving Anti-Money Laundering Practices.” In the report the Caucus members tell law enforcement to improve investigation and prosecution of major crime.
Five of the report’s nine recommendations have a direct impact on financial institutions. These five recommendations should drive how AML officers and risk management executives assess and improve compliance programs so institutions are better prepared for increasing government scrutiny. The five recommendations are:
1. Stronger Department of Justice Enforcement:
“The Caucus calls on the Department of Justice to fully enforce existing criminal sanctions against both the financial institutions and the individuals (our emphasis) knowingly and intentionally responsible for the criminal activity more forcefully…”
In a prior Insights & Action post; we wrote about what constitutes the concept of “knowingly” violating the BSA and how it is different than people realize.
The public mood towards banks and those that violate regulations is volatile. AML officers have enormous responsibility. Those in the industry understand the challenges everyone in AML compliance face. However, when the next big failure arises, the government will pursue charges against individuals, and those charges will stem from an institution’s failure to identify, investigate, and report suspicious activity.
Is your institution’s suspicious activity detection, investigation, and reporting program as good as it needs to be?
2. Close Gaps in Money Laundering Laws:
“Strike the requirement that the government must prove a defendant knew the purpose and plan behind transportation of laundered funds.”
The Caucus states this provision will better enable the prosecution of “mules.” Mules are the people that carry duffel bags full of money and when caught claim they had no idea the duffel bag was full of money. Additionally however, such a change in law bolsters Department of Justice efforts to pursue AML officers and bankers by further strengthening the prosecutorial concept of “should have known” or “willful blindness.”
If you are not familiar with how prosecutors apply the “willful blindness” concept read about it here.
3. Prioritize Major Investigations:
“Law enforcement and regulatory agencies should prioritize major investigations that target money-laundering facilitators. These so-called “facilitators” are often white collar professionals who are responsible for assisting in the transfer of money on behalf of violent criminals.”
4. More Staff at FinCEN;
“To support its investigatory mission, FinCEN should enter into Memoranda of Understandings (MOUs) with Immigrations and Customs Enforcement or other federal law enforcement agencies to detail special agents to FinCEN. Finally, Congress should ensure that FinCEN has adequate resources to carry out its mission. The Caucus believes that a more effective FinCEN could pay for itself over time with the assets that are seized.”
We don’t see these two recommendations as suggesting AML officers are “facilitators” or that institutions will be asked to pitch in at FinCEN. These recommendations are significant because Congress is telling law enforcement to spend more time and resources going after the big cases.
Inevitably this means law enforcement will follow evidence further to uncover larger, more menacing criminal operations. This more intense look into money laundering will lead investigators to scrutinize AML programs at financial institutions of all sizes. When Special Agents and Assistant United States Attorneys begin looking at how banks detect, investigate, and report suspicious activity, AML compliance programs will come under intense scrutiny.
Can your institution withstand this level of inspection?
5. Beneficial Ownership Identification:
“We also urge the Administration to finalize a rule that was proposed on March 5, 2012 that all financial institutions be required to determine the beneficial owner of accounts that they hold. The rule proposes that financial institutions do this as part of their customer due diligence.”
The final resolution of this issue will have a significant operational impact on financial institutions. Once the rules around beneficial ownership identification are finalized, institutions will need new processes, changes to how accounts are opened, to train staff, build new databases, and hire more people in order to comply. This will happen soon.
The American people expect that financial institutions follow the rules. Congress wants to give law enforcement and regulators more power and resources to enforce those rules. AML officers and the financial institutions they work for need to prepare.
Please feel free to share your thoughts, opinion and questions in the comment section.