This article originally appeared in Corporate Compliance Insights, 1 November 2019.
At this year’s ACAMS AML and Financial Crime Conference in Las Vegas, it was clear that an ever-changing environment is driving urgency around combating risk. K2 Intelligence’s Michelle Goodsir and Gabe Hidalgo discuss this and other hot topics from the event.
At the 18th Annual ACAMS AML and Financial Crime Conference in Las Vegas, it was clear that an ever-changing financial crimes compliance environment is driving urgency for professionals and companies alike to get their procedures in check to combat risk. But where should they begin?
A few core themes were present throughout sessions, circling around emerging trends and legacy risks that financial organizations are facing. While some of the concerns can seem daunting, there is good news: organizations are positioned to adopt best practices and refresh current processes to meet these challenges head on.
Empowering compliance is fundamental in business decision making. In today’s risk environment, it is more important than ever for compliance professionals to have a seat the table. When launching new products, deploying new processes, or creating new systems, compliance must be involved from the outset.
Testing and implementation take time, so while leadership may have a vision for a product or service, it is easier to build compliance from the start rather than reverse engineer it. For example, new product workflows must include monitoring, a step that often does not come with a blueprint and cannot be solved for overnight. Understanding potential compliance requirements and workflows before a product comes to market can generate cost savings and prevent last minute delays caused by implementing and testing a monitoring system later in the product life cycle. Linking compliance needs with business objectives will continue to grow in importance. Compliance should be invited to every new product approval committee meeting.
Existing skill sets and resources can be leveraged to integrate our thinking around AML and fraud. There is still wide disparity among financial entities on how fraud and anti-money laundering should work together to set policies, conduct investigations, and share information. An audience poll conducted during the panel, “Playing Nice Together: Best Practices for an Effective FRAML Framework,” found that half of the organizations present had completely separate departments for fraud and AML, with only 25 percent hosting those capabilities within the same department.
As the ties between fraud and money-laundering become clearer, it is becoming equally important for companies to find ways for their internal teams to collaborate on prevention. Organizations should begin implementing capabilities and communications between these core functions. While nearly half (42 percent) of those polled during the session noted daily communications between fraud and AML, there is work to be done—a substantive portion of those in attendance communicated monthly or quarterly (24 percent) and some reported “never” communicating between the two functions (16 percent).
Integration can begin with shared case management tools, partnership on SAR reporting, sharing of intelligence, and recognizing emerging financial crime trends in order to get ahead of a crisis before it happens.
Cannabis banking is just as hazy as its always been. While there seemed to be traction with the SAFE Banking Act, with the hopes of creating protections for institutions that provide financial services to cannabis-related businesses and their service providers, uncertainty looms across financial institutions assessing whether the risk is worth cashing in on. Though several states have varying degrees of clearance for marijuana related businesses, at a federal level, lawmakers continue have not provided updated regulatory guidance.
Throughout panels at ACAMS, it became clear that there will be a split in the banking community when it comes to cannabis: If the SAFE Banking Act is signed, some financial institutions will sign on with cannabis clients, while others will wait until cannabis is fully cleared at a federal level before diving in. However, full clearance will require a multitude of steps including de-scheduling marijuana as a schedule 1 drug and that may be years away.
Thinking beyond theory, policy, and regulatory requirements. Making compliance operational is paving the way to the future for financial services firms more broadly, including banks, FinTech, broker dealers, private equity and hedge funds, and more. Having a savvy and experienced AML officer that not only envisions what a program looks like but can execute on its successful implementation will be key.
For example, staffing up and staffing down cannot be contingent on an institution receiving MRAs (Matters Requiring Attention) from examiners and regulators. For compliance to be effective, organizations must have teams—whether internally or outsourced—at the ready to handle the vast volumes of transaction data and reporting that comes along with being a modern financial institution. It is no longer enough for compliance to write the policies and challenge as a second line—compliance must be engaged and part of the culture.
Compliance will always face new challenges, and sometimes see a resurgence of legacy challenges. Whether its smaller compliance budgets, hiring experienced compliance officers from a shallower pool of qualified applicants, or dealing with antiquated systems, we have all been affected. Only by coming together as an industry can we continue to leverage our collective experience to drive effective policies and procedures, work with new systems and tools, and position compliance professionals to help their organizations to overcome risks and thrive.