I had the pleasure of attending SIFMAs 9th annual Anti-Money Laundering and Financial Crimes conference in New York City on March 4 . There was an experienced and diverse set of speakers and panelists from FinCEN, OFAC, FINRA, the SEC, the Treasury Department, FBI, Department of Justice, and Federal Reserve Bank, along with senior AML and compliance personnel from the private sector. Several topics were discussed throughout the day, including common examination findings, enforcement actions, the importance of implementing a risk -based approach, financial fraud, dealing with intermediaries, and suspicious activity monitoring and reporting.
The first topic was a discussion on how information obtained through a firm’s Customer Identification Program (CIP) can be used to reduce risk in other areas of the firm. Michael Flowers, Counsel and Member of the Senate Subcommittee of Investigations, discussed the UBS case in which the firm was aware of US clients who completed and filed W-8s. UBS was familiar with the tax status of the US clients because of the AML program’s CIP process, and in the subcommittee’s view, should have acted upon discovering the fraudulent tax documents. This can be used as a good example to demonstrate how important it is to take action against any inconsistency discovered among tax documents versus customer information already verified and retained by the firm.
Next was a discussion around AML common examination findings and trends. Mary Ann Gadziala, Associate Director at the SEC, shared common findings from the 340 examinations performed last year. Top findings were lack of an independent examination performed, the use of an unqualified examiner, untimely/incomplete SAR filings, CIP program issues, or inadequate policies and procedures.
- In the same session, Michael Rufino, SVP and Deputy of Member Regulation at FINRA, shared untraditional red flags to be aware of and noted there are usually combinations of red flags, not just one, that lead to discovering money laundering activity. There have been many narcotics trafficking cases linked to annuities and the surrender of annuities after the free look period. Additionally, accounts that are very active after a long period of dormancy, pre-determined sales for higher prices, abnormal/sudden extravagant spending using debit cards, constant changes in the control of an account, and the manipulation of low -priced securities should all be investigated and can be money laundering red flags. Finally, be aware of DSWs , or deposits, sales, and wires. Money launderers are looking to move money quickly and avoid regulators.
This led to the topic of enforcement cases and fines. It’s important to remember how serious the topic of anti- money laundering compliance is to the regulators. There has been an increase in some of the fines imposed on firms not following the rules. For example, OFAC now has a civil penalty of $250,000 per violation, up from $100,000. FinCEN can fine firms as much as $25,000 per day for an insufficient AML program. And for each SAR or CTR not filed, a fine of $100,000 can be imposed. SARs are very important to the law enforcement community. Laura Williams, Special Agent of the FBI, encourages firms to complete the narrative section of the SAR form as completely and thoroughly as possible. Also, listing the client’s e-mail address will allow them to perform a more comprehensive investigation.
Throughout the seminar, the phrase “ risk - based approach” was mentioned consistently and highlighted as an important part of all firms’ compliance programs. Using a risk -based approach can help determine which areas of the firm’s business are high risk and warrant the most in-depth reviews. Common considerations include the types of products, customers, methods of distribution, current regulatory focus, and past examination deficiencies. Some questions to ask on a regular basis include: What are the major products we solicit? How are funds deposited and withdrawn? Who are our clients? How has the regulatory environment changed and have we updated our policies to keep up?
Regulatory Compliance, LLC is dedicated to partnering with our clients and providing the most up -to -date information on the current regulatory environment. Additionally, we are constantly updating and refining our examination program to ensure it meets all regulatory rules and guidelines.
If you would like more information on our independent AML examination process, please contact Rich Horgan or Karen Hagan at (888) 734-2667.
If you would like more information on the conference, please contact Nathan Jodat at the same toll -free number or e-mail him at njodat@regulatorycompliance.com.
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