Anti-money laundering (AML) efforts have been of great concern to both regulators and financial institutions in recent years, with a growing focus on cybercrime and data collection.
While the financial system grows in complexity, so does the potential risk to the financial services industry and the role of regulatory bodies such as the Financial Crimes Enforcement Network (FinCEN). Congress has mandated that FinCEN implement a strategy for anti-money laundering and countering the financing of terrorism (AML/CFT) with a list of priorities to be evaluated every four years.
The new AML/CFT priorities list covers a variety of topics, including cybercrime and fraud, but the goal is to create a clear and effective policy tool that compliance teams can use to properly allocate resources and develop strategies for mitigating risk and assisting AML efforts. Among the proposals from FinCEN is a requirement for AML programs to be conducted with the intent to supply useful data to government authorities. Along with this, FinCEN will publish a list of “strategic anti-money laundering priorities” to inform compliance professionals’ decision-making.
The question on the minds of many compliance teams is how the information they provide will be used. Understanding the needs of law enforcement officials will allow for better-designed and more intentional data gathering.
The primary way financial organizations provide data to government agencies is through BSA (Bank Secrecy Act) reports. These reports, such as suspicious activity reports or currency transaction reports, are required under several FinCEN regulations. Law enforcement can use these and other financial reports in several ways. The first and most obvious use for BSA reports is to aid in criminal investigations. Reports can be used as evidence in prosecutions or provide a new line of questioning during an investigation.
Secondly, law enforcement can use BSA reports to analyze trends and patterns to help uncover emerging threats. Data such as a person’s assets, contact information, and occupation can provide evidence, eliminate a suspect, or narrow an investigation.
While “covered institutions are not required to make any immediate changes to their risk-based AML programs in response to these Priorities,” according to FinCEN, final rules are forthcoming, and the bureau points out that “institutions may wish to start considering how they will incorporate the AML/CFT Priorities into their risk-based AML programs.”
So how can compliance teams prepare to implement effective strategies to meet requirements, mitigate risk, and provide useful data?
First, your institution’s board of directors should consider the priorities issued by FinCEN when deciding how to instruct the chief compliance officer. A clear understanding of the priorities will allow teams to make better decisions with their limited resources. Teams will also need to implement a system for continuously monitoring policy compliance and BSA-related data collection.
While new regulations always carry the possibility of increased compliance burden, with proper tools and oversight, compliance teams can work to implement meaningful strategies to combat financial manipulation and criminal funding.