ACAMS Conference 2019: Regulators’ Panel Sees Banks’ Anti-Money Laundering Weak Points

Topics: ACAMS, Financial Crime, Financial Fraud & Anti-Money Laundering, Financial Institutions, Government, Government Regulation, Money Laundering, Regulatory Intelligence, Terrorist Financing


LAS VEGAS — When a bank is negotiating the remediation of anti-money laundering compliance weaknesses, it should ensure that it can complete required improvements within the agreed-upon time frame or risk a mandatory cease and desist order, a senior official with the Office of the Comptroller of the Currency (OCC) said this week at an industry conference in Las Vegas.

“We are continuing to see some banks that are challenged to meet corrective action time-frames,” Spencer Doak, director for anti-money laundering (AML) compliance policy at the OCC, remarked during the 18th Annual AML & Financial Crime Conference held by the Association of Certified Anti-Money Laundering Specialists (ACAMS). “One thing that I always like to say about that is, ‘When you negotiate corrective action timeframes, truly make that a negotiation.'”

For instance, if a bank knows it takes six months to a year to correct an issue with a suspicious activity monitoring system “make sure you commit to a date when you think you can reasonably achieve those goals,” Doak said, adding that the law can force regulatory agencies to take formal action against institutions that fail to meet their commitments.

“If you don’t, that’s what creates the issues with the mandatory cease-and-desist orders and so forth,” he explained. “Please don’t commit to things you know you can’t do.” Doak’s remarks came during a panel at which regulators discussed current AML challenges faced by the banking industry as revealed by recent examinations.

Indeed, these examinations have revealed that some banks also continue to have issues with data quality — which may impact risk identification and monitoring — as well as the adequacy of due diligence being collected, Doak said. “We are seeing some indication they may not (always) have a full understanding of the customer.”

So-called model risk management — involving the quality testing of suspicious activity monitoring systems — is also an area that some banks may be able to improve, Doak added.

Different Problems for Different Banks

For banks supervised by the Federal Reserve, however, the “most common issue is in the area of internal controls,” said panelist Suzanne Williams, a senior regulatory official with the Fed. Smaller institutions face resource issues, such as high staff turnover or inadequate AML compliance staff, Williams said. These and other problems can be triggered by new customers or mergers and acquisitions, she said.

She noted, however, that the Fed has seen “significant improvements” and “sizable reductions in identified issues” with regard to the AML regimes of smaller, foreign banks.


Further, the “highest number of violations” spotted by Federal Deposit Insurance Corporation (FDIC) examiners are related to Currency Transaction Report (CTR) filings, said another panelist, Lisa Arquette, a senior regulatory official with the FDIC. “Those sound technical and isolated, and they are, if they’re not systemic.”

The FDIC also sees violations in the area of internal controls, which dictates how money-laundering and terror finance risks are mitigated, Arquette said, adding that some banks also have failed to comply with Section 314(a) information sharing obligations. Section 314(a) — a requirement created by the USA PATRIOT Act — requires banks to respond to U.S. Treasury Department requests by reporting the existence of accounts or transactions linked to individuals identified by law enforcement authorities.

“We’ve seen plenty of areas where the bank is not covering the entire portfolio, whether it’s loans, deposits, or they’re just not doing it at all,” Arquette said. “I would think that by 2019 everyone’s got that down pat, but there are some that don’t.” However, echoing the remarks of other regulators who spoke on the panel, she said “banks overall are doing a good job” of managing money-laundering risk.

Although securities firms are “doing pretty well” with regard to customer due diligence (CDD) compliance at on-boarding, in part because of suitability requirements, firms should focus on ensuring that information is kept current, said panelist Lourdes Gonzalez, assistant chief counsel for sales practices with the Securities and Exchange Commission’s Division of Trading and Markets. “A challenge that we’re seeing is how to incorporate your process for refreshing CDD when red flags (occur),” Gonzalez explained.

Some brokers in an institutional setting also “are having a bit of a challenge with respect to incorporating CDD into their business lines,” she added.