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The Changes in the US AML/ATF Arena

The Changes in the US AML/ATF Arena. Rudolph F. Zepeda, Jr. Federal Reserve Bank of Atlanta Miami Branch.

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The Changes in the US AML/ATF Arena

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  1. The Changes in the US AML/ATF Arena Rudolph F. Zepeda, Jr. Federal Reserve Bank of Atlanta Miami Branch

  2. Almost six years after the USA Patriot Act toughened banks' anti-laundering requirements, large banking companies continue to face massive fines for failures in their programs. More large fines are undoubtedly on their way

  3. Banks Can Never Rest • Every time you think you have it covered, you constantly have to update what you do • ABN Amro Holding NV $80 million but may receive a second penalty of nearly $500 million • FINCEN keeps updating its guidelines. • http://www.fincen.gov/pub_main.html

  4. U.S. Government’s Concern • Treasury Dept. considering sweeping structural changes in U.S. financial services system, such as, consolidating regulatory agencies and combining charters of federal and savings institutions. • May put the primary responsibility on blocking those transactions on financial institutions and other payment processors that have banking relationships with Internet gambling companies.

  5. Law Enforcement Latest Concern • Stop Money Laundering by • Increasing fines and sanctions • Forfeiture of assets which revert to the State • Utilize Cash Transaction Reports (CTR’s) to follow the Money • Stop Terrorist Financing • Increasing intelligence utilizing SAR’s • Consider the newest technological advances such as stored value cards as a vehicle to move funds.

  6. Banker’s Concerns • Costs continue to increase in order to establish an efficient AML/ATF program • In trained personnel • Information technology (IT) • Enterprise-wide programs • Throwing money at the problem doesn’t solve it and despite the cost can still result in fines and sanctions. (Union Bank) • Direct competition from non-regulated entities • Impatient regulators, who tolerated problems in the past because systems were being acquired.

  7. Legislator’s Concern • The creation of a single, monolithic federal bank regulator, given the enormous power bank regulators have over financial institutions. • Increasing regulatory burden • Lessons from the recent sub-prime crisis require further regulation of non-bank financial institutions

  8. Regulator’s Concerns • More detailed regulations and laws are on their way • Banks have had 6 years to comply • Bank directors have to take AML training seriously and incorporate into culture

  9. Regulator’s Concerns • The days when bank management tells us that a new system or new AML officer hires need time to improve the existing system are over. • If they have not made progress despite spending within a 12 month period • Supervisory actions and fines will increase if no progress has been made in an appropriate time.

  10. Regulator’s Concerns • With the new legislation and GAO scrutiny • Require more experienced personnel and • Update examiner’s knowledge on new software and technology • Expand AML examination programs to • Large Banks • Community Banks • And the need for SEC and NASD to step up AML compliance on broker-dealers.

  11. Basic Elements of Sound AML Program for Broker-Dealers • A comprehensive assessment in order to determine the risks certain products and product groups pose for money laundering and terrorist financing. • A complete analysis to understand the universe of all transaction types the institution utilizes. • A comprehensive assessment to determine the risk the customer base poses for money laundering and terrorist financing. • Evaluate whether the commercial AML monitoring system to be implemented can be customized to the specific needs and trading activity of the broker-dealer, or whether the logic of the detection scenarios is "set in stone." • Determine the amount of post-implementation support the broker-dealer can expect from an AML monitoring system vendor.

  12. Major Changes Affecting the Caribbean • Correspondent Bank Accounts • Heightened scrutiny due to new issuance of updated Bank Secrecy Act/Anti-Money Laundering Examination Manual • Outlawing internet gambling • The shift by money launderers to trade-based money laundering. • The need to look at AML enterprise-wide

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