For more than 30 years, the Financial Action Task Force (FATF) has been the global standard by which many countries have wholeheartedly adopted the measure to combat Money Laundering and Terrorist Financing(ML/TF). Since the FATF first started in the late 1980’s, many countries have come a long way in adopting FATF regulations and limiting the spread of ML/TF. While the primary G37 members have strict adherences and enforcement to the FATF 40 “Recommendations”, other members follow the guidelines with more leniency. When FATF was first founded,  there were only 7 pages of the 40 “Recommendations”. A mere 7 pages!  On the other hand, there are now a staggering 127 pages printed In the recently published June 2019 version of the “Recommendations”. Let that sink in.

Similarly, the original version only mentioned “policies” once, while in the latest version these policies are mentioned 30 times. This means that new “policies” were added almost 10 times per decade, resulting in about 42 new pages per decade.  This progression is not lost on most Compliance Officers, nor is it unexpected whenever regulations come into play.  So, when one may I ask, “Why is an AML Policy so important?” The answer to the question comes down to, its required by law!

Seriously though, WHY! Apart from the legal aspect there are many more important reasons why AML policy is becoming so crucial.  To be able to combat ML/TF risk, one needs to understand the risk which can come from all types of criminal individuals and organizations.  From the lone wolf to the entrepreneurial criminal enterprises, criminals launder trillions of dollars in drugs, human trafficking, bribery and the like according to a UN study in 2011. The FATF states “The possible social and political costs of money laundering, if left unchecked or dealt with ineffectively, are serious. Organized crime can infiltrate financial institutions, acquire control of large sectors of the economy through investment, or offer bribes to public officials and indeed governments.”

For some companies it can be complicated to build and maintain an AML Policy. AML regulations are constantly being updated as seen by the FATF example over a 30+ year period. In addition, some of these businesses operate in more than one jurisdiction, and often there is more than one regulator. If you think you have what it takes to build your own AML Policy, take our CAMLO quiz and see if you have what it takes.

If not, our team at KYC2020 has set out to create a tool to help with the development and support of an AML policy.  It was built with templating in mind to have a base to start with and then customize for each entities specific lines of business.  The first version was focused on FINRA regulated entities in the US.  Now we have two more in production for Money Service Businesses (MSB) and Dealers in Virtual Currencies (DIVC) in Canada and the US. The AML Policy template mechanism is structured to allow for flexible sections and content to be tailored to the specific activities of the Regulated Entities (REs).

Once a template is chosen, the RE works through the various sections answering the questions related to the particular component of a standard AML Policy, while customizing the components and sections specifically related to their business.  Once done, the RE can request to have a certified CAMS (or equivalent) person review it and provide additional feedback or suggestions on updates and changes.

When the RE is satisfied with the results, the AML Policy can be frozen, and version control kicks in.

As with FATF and their 40+ recommendations, it is the same idea with the RE’s AML Policy.  It will be a living breathing document that expands and changes over time.   The constant transformation of the document is a good thing, it demonstrates that the REs AML regime is maturing over time to deal with new risk, regulations, and changes to the business to fight ML/TF.

Want to find out more about our AML Policy tool?  Click here and sign up for this and all the other offerings at KYC2020.

• Financial Industry Regulatory Authority (FINRA)
• Financial Crimes Enforcement Network (FinCEN)
• Federal Financial Institutions Examination Council (FFIEC)

Financial Industry Regulatory Authority (FINRA)

FINRA is a private corporation in the United States that acts as a self-regulatory authority. It became the successor of the National Association of Securities Dealers in 2007 shortly after the SEC approved its formation. Since then, FINRA grew to over 3,400 employees working primarily out of Washington, D.C. and New York, NY with 20 other regional offices throughout the United States.

FINRA’s overall responsibilities revolve around regulating member brokerage firms and exchange markets, one part of which is ensuring AML compliance. With these responsibilities, the 3,400 employees oversee approximately 4,250 brokerage firms, 154,000 branch offices, and 625,000 registered representatives. As a part of these responsibilities, FINRA holds periodic regulatory exams for all member firms they oversee. These reviews help FINRA determine where they see room for improvement within these institutions for more streamlined compliance.

Despite being a private corporation, the Securities and Exchange Commission granted FINRA approval to discipline registered representatives and member firms. They also license individuals, admit firms to the industry, and create the rules that govern their behavior. In 2018 alone, FINRA levied approximately $61 million in fines and another $25 million in restitutions. This makes them one of the primary organizations you will have to deal with to achieve AML compliance if you are dealing in securities. They set the rules and regulate them, so be sure to pay attention to everything they do.

Financial Crimes Enforcement Network (FinCEN)

FinCEN was formed in 1990 with the goal of combating domestic and international money laundering, terrorist financing, and other financial crimes. They’re a bureau of the United States Department of Treasury that analyzes information about financial transactions. They are one of 147 Financial Intelligence Units (FIUs) that make up the Egmont Group of Financial Intelligence Units. FinCEN’s director summed up their mission through a statement in 2013 as, “safeguard the financial system from illicit use, combat money laundering and promote national security.” They accomplish this mission through following any financial trails that might lead to a case of money laundering, terrorist financing, or other financial crimes.

One of FinCEN’s primary responsibilities revolve around data collection and data use. They created the FinCEN Query which allows other Financial Intelligence Units to search the mass amounts of data FinCEN collects on all financial transactions. The search engine operates similar to Google making it easy for any of the Financial Intelligence Units to find any information they need. They also create four yearly reports:

• Suspicious Activity Report
• Currency Transaction Report
• The Designation of Exempt Person
• Registered Money Service Business

These reports contain their findings on various threats and indicators facing the United States when it comes to combating money laundering, terrorist finance, and financial crime

Through the use of the extensive data they collect on financial transaction, they conduct investigations into at risk individuals and organizations. This puts anyone not following AML regulations at risk of an expensive investigation that could halt your business entirely. So, to avoid a nasty letter from FinCEN, make sure you follow all financial requirements and regulations to ensure you do not participate in money laundering, terrorist financing, or any other financial crimes.

Federal Financial Institutions Examination Council (FFIEC)

The FFIEC was established in 1979 through the Financial Institutions Regulatory and Interest Rate Control Act of 1978. They are composed of five banking regulators that create uniform guidelines and standards that every financial institution must follow. The five banking regulators that make up the FFIEC include:

• Federal Reserve Board of Governors
• Federal Deposit Insurance Corporation
• National Credit Union Administration
• Office of the Comptroller of the Currency
• Consumer Financial Protection Bureau

In recent times, one of the top priorities of the FFIEC became protecting financial institutions from cyber-attacks. They achieve this through creating guidelines and standards for cyber security that every financial institution must follow. As part of their effort to help financial institutions combat cyber-attacks, they released the Cybersecurity Assessment Tool. Regulators of the FFIEC use the results of this tool as part of their examination into any financial institution.

Another helpful resource the FFIEC released to simplify compliance with the Bank Secrecy Act and Anti-Money Laundering is their BSA/AML info base. Within this infobase you can find guidelines to help you achieve AML compliance, examination manuals, and a range of other resources to help you maintain compliance. Since their overall goal surrounds helping financial institutions combat financial crimes, they aim to teach appropriate standards you should follow to maintain compliance. You can also use this database to see exactly what the FFIEC looks for during compliance examinations of your organization. This helps ensure you pass your examination when that time inevitably comes. You should look to the FFIEC to help you create procedures and maintain compliance with all BSA and AML regulations.

Do You Need Help Achieving and Maintaining AML Compliance?

These organizations are only the tip of the iceberg when it comes to navigating the complexities of AML Compliance. There is the OFAC which regulates all foreign assets, the OCC, FDIC, FRB, CFPB, and then various state level oversight agencies. These organizations play an important role in ensuring you remain compliant with all AML regulations.

If you need help navigating the complexities of AML compliance, contact KYC2020 for a consultation today. They offer software tools to help you manage all aspects of AML compliance and streamline your AML Compliance Program to ensure efficiency. KYC2020 also supports a network of qualified CAMS certified AML Compliance Specialists to help answer any of your questions and guide you through the process of achieving AML compliance. AML compliance does not have to be costly or complicated, so let KYC2020 help you decide your next steps to achieving and maintaining AML compliance in a cost effective and efficient way.

Spreadsheets for Everything

While an RA is the foundation for a good risk-based AML Regime, it is often marginalized by many non-bank financial firms.  It is done in a superficial manner, using tools that are convenient and free, but ill-suited for the job. Spreadsheets are generally the tool of choice to input, track, and manage the annual risk assessment compliance requirement. As one can imagine, this approach is rather ineffective. It lacks proper controls, is prone to human-errors, difficult to audit, share, or track revision history. Moreover, as banks enhance their KYC regimes, they require annually updated formal AML Risk Assessment documentation.  The inherent limitations of spreadsheets for RA reporting and management is obvious.

Alternatives to Spreadsheets

So then, what are the alternatives to spreadsheets? The challenge once again for most SMEs and FinTech innovators is Cost, Availability, Competence, and Convenience. In our search for alternatives, we could not find a competent RA tool that met our basic requirements, was available at low-cost, was easy to get started, and convenient to use.

When we introduced our FREE Watchlist Curator Tool, we made the following statement:

“At KYC2020, we could have invested in writing a blog and talked about why “over-screening” is an expensive problem…  Instead, we decided to have our CAMS AML specialists build a tool to help you identify what Sanction, PEP, and watchlists you should be screening based on your company’s risk profile. And we decided to make our watchlist builder available free of charge.”

KYC2020 Free AML Risk Assessment Tool

For our AML Risk Assessment Tool, we decided not to be so lazy. We not only built a tool that we could make available for FREE, but also forced our CAMLO, Joseph Iuso, CAMS, to write a Blog on the What, Why, and How’s of an AML Risk Assessment. Between the information and wisdom of Joseph’s blog and the competence and convenience of our RA tool, I believe we have got you covered. Of course, we have the standard disclaimers, and you should already know that a tool cannot replace the advice of your in-house Compliance Officer.

Get started by clicking below.

KYC2020 AML Risk Assessment Tool benefits heavily from the Federal Financial Institutions Examination Council’s (FFIEC) Risk Assessment guidelines, as well as the Conference of State Bank Supervisors (CSBS) BSA/AML Self Assessment tool.  The tool considers five (5) main categories to arrive at an aggregate risk score for your business. These are: 1) Products and Services, 2) Customers, 3) Geography, 4) Operations, and 5) Agents. For each category, you have the opportunity to specify the High, Medium, and Low Risk definitions inherent to the business. For the inherent risk definitions you then specify your controls and mitigation measures to arrive at the residual risk; the risk that still remains after application of your counter-measures. This residual risk is then scored and aggregated across all categories to complete your risk assessment.

Who said it would be Easy

Sounds complicated? That’s because it is. Even for AML specialists working on a low-risk profile business, this is a minimum 2+ hour investment of time. It is for this reason the tool has the ability to save work and complete the assessment over multiple sessions. With a little bit of study, watching our Get Started Video, and rolling up your sleeves you can get through with your risk assessment on your own and for FREE!

Need Help with your RA?

For those who need a little bit of help completing, we offer some reasonably priced paid options to speed up your risk assessment process and follow best practices. These include, access to business specific templates that can be customized to speed up the assessment, different consulting packages to help prepare, review, and/or audit your Risk Assessment by our CAMS or VSKILLS certified AML specialist.

Once again, there is no catch. The tool is no obligation and we do not take any payment information. We do hope you might take the time to see what awesome and affordable AML compliance solutions we offer, from Global Watchlist Data to Sanction Screening to AML compliance consulting services. Chat with us online now, email us, or just use the tool. Our aim is to help you reduce the cost and friction of AML compliance.