The Changes in the US AML/ATF Arena

Rudolph F. Zepeda, Jr.Federal Reserve Bank of AtlantaMiami Branch

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

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

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.

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.

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.

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

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

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.

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.

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.

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