Effective anti-money laundering (AML) programs require quality control.
Indeed, the $8 million in AML fines against CommunityBank of Texas in December was a stark reminder of the importance of AML quality control and the consequences of failing to ensure AML program expectations are met.
Despite having an AML program and AML monitoring software, the bank was cited for numerous Bank Secrecy Act (BSA) violations related to failing to adhere to its program procedures. Other troubles included neglecting to file timely and complete suspicious activity reports (SARs) on roughly $100 million in suspicious activity, according to consent orders from the Office of the Comptroller of the Currency (OCC) and the Financial Crimes Enforcement Network (FinCEN).
AML quality control is particularly essential as more financial institutions combine AML/BSA and fraud programs. In Abrigo’s 2021 BSA/AML and Fraud Staff Survey, two-thirds of respondents said their financial institution’s BSA department also covers fraud. Based on survey respondents, combining fraud and AML departments is more common among smaller institutions, which is perhaps unsurprising due to limited resources. Sound quality control can ensure compliance and prevent money laundering and fraud as banks and credit unions continue to blur the lines between the two areas.
Ensuring program requirements are met
The procedures that financial institutions develop for their suspicious activity monitoring programs are designed “in a way to make sure that you're adhering to the regs and running a tight ship,” said Josh Hawkins, Director of Abrigo’s Financial Crimes Investigation Unit. “What the QC can do is come in behind and ensure that the intended outcomes are being achieved by the activities of your institution’s procedures.”
Regulators expect financial institutions to maintain a quality control program, even if one is not explicitly mandated, he noted. In fact, if regulators are scrutinizing your quality control, it’s likely because they’re finding other problems with your AML program, Hawkins said.