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ACAMS Regulatory Roundtable: AML Hot Topics

Terri Luttrell, CAMS-Audit, CFCS
October 30, 2018
Read Time: 0 min

At the ACAMS Annual AML & Financial Crime Conference in early October, there were a number of informative sessions with great takeaways for anyone in the BSA/AML industry. One session, in particular, a regulatory roundtable represented by FinCEN, OCC, FDIC, OCIE and FRS, was rich with AML hot topics that the supervising institutions are seeing while examining financial institutions.

Here are some of the key takeaways of exam findings to consider at your own financial institution:

1)    Risk Assessments

  1. They are not robust enough and need a deeper dive into all aspects of institutional risk.
  2. They are not supported by transactional data. Remember, it’s not fact unless you can prove it with data.
  3. They are not current, especially upon a merger or acquisition.
  4. Institutions are not coming to the conclusion for the true risk of the institution. Are you too close?

2)   Suspicious Activity Monitoring

  1. Institutions are not staffing sufficiently, resulting in alerts not worked in a timely manner. As they noted, 30 days is too long before sending alert to case.
  2. Adjusting your AML system parameters to meet the number of alerts current staff can work is not acceptable. You need to appropriately staff for the number of alerts you receive.
  3. Institutions provide insufficient documentation on why an alert or case was cleared as not suspicious.
  4. Your AML system is not optimized; too many false alerts or too few alerts suggests possible undetected suspicious activity.
  5. Insufficient risk scoring of higher risk countries

3)   A Culture of Compliance is still an ongoing issue for some

  1. Executive management is often found not “walking the walk.”
  2. The tone in the middle must be compliance supportive, not only from executive management but for all lines of business
  3. The BSA Officer does not have independent, proper decision-making authority.

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4)  Annual Training

  1. Institutions are found to be only training front line staff instead of the entire staff.
  2. They are not customizing training to the specific institution and instead providing generic training.
  3. Computer-based training may no longer be enough; institutions may need more in-person annual training.

5)   System Conversion Issues

  1. There is insufficient data validation after system conversion (teller, core, or AML system).
  2. No gap analysis was done between old AML system and the new system.
  3. Implementation issues causing the BSA suspicious activity monitoring program to be in jeopardy (feeds, thresholds, etc)

6)   Policy and Procedures

  1. Procedures do not match the board-approved policy.
  2. Actual practice and processes do not match written procedures.
  3. Beneficial Ownership processes are not incorporated into procedures.
  4. CDD/EDD procedures are not risk-based.

A couple of other important topics are worth mentioning that were covered by this regulatory panel:

1)   Technology: Regulatory agencies are highly supportive of the future of artificial intelligence (AI) and machine learning. They warn, though, that:

  1. AI must be transparent. You must be able to explain all processes and how your system is working. You must also understand the software in its entirety and the risk of AI.
  2. Machine learning must be checked for quality assurance just as human staff must be. It should be verified periodically to ensure the robot is behaving as you have documented.
  3. AI will work best by starting with a few simple processes. Save your human resources for the in-depth investigations. AI will not replace the need for the investigative human instinct.

2)   The FFIEC Exam manual is being rewritten but will not be completed before 2019. No delivery date was estimated.

If you were unable to attend the conference, this is just a small view of the wealth of knowledge and information that was shared. It is our hope that this short breakdown helps you prepare for your next exam without having any of these pitfalls.

About the Author

Terri Luttrell, CAMS-Audit, CFCS

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

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