AML and sanctions are areas of great complexity and constant change. Numerous high-profile enforcement actions definitively show that AML and sanctions compliance remains top priorities for regulators and law enforcement. In recent months, the US Government has explicitly stated it will focus intensely not just on what it sees as institutional lapses and malfeasance, but also on individual acts and liability. Furthermore, Duff & Phelps’ Global Enforcement Review 2015 shows a global trend of an increasing tendency of regulators to focus on individuals, both through criminal sanctions and civil fines.
Criminal and regulatory enforcement actions in these areas have resulted in multi-billion dollar fines and criminal liability. But it’s not just the massive, head-line grabbing cases that demand attention. Smaller, though still significant, actions show that financial services businesses are being closely scrutinized. Moreover, unregulated corporate entities are also open to financial crime risk through the enforcement of sanctions, corruption or other criminal laws.
While it remains to be seen how the stated focus on individuals will play out, there can be no doubt that in this climate, financial controls, including robust AML and sanctions programs, are critical to effectively managing risk. Emphasis on the importance of these areas should come from the highest organizational levels. In one public statement after another, regulators stress that they expect management to set the proper tone – to demonstrate that compliance matters.
Today’s AML compliance regime reflects influences that technically come from outside the AML sphere - most notably,
the threat of terror finance. Although distinct from traditional money laundering, it nonetheless has a significant impact on today’s money laundering enforcement regime. In fact, the threat of terrorism is what initially fueled the tremendous changes in compliance expectations for banks. Other influences are the significant sanctions, anti-bribery and corruption cases brought by law enforcement in the past several years.
In this context, AML compliance programs must do more than just identify money laundering. They must be holistic in their approach to detect financial crime. Such programs must be designed to take into account suspicious money movements that may indicate a whole host of crimes: corrupt payments, including bribery, human trafficking, and narcotics trafficking; securities fraud and Ponzi schemes; and other fraudulent schemes. In fact, programs will be evaluated by regulators with diverse areas of focus: securities fraud (SEC, FINRA and FCA); financial crime and money laundering (FinCEN, FCA and law enforcement); and institutional safety and soundness (functional regulators).
Of course, the ultimate goal here is not just to respond to regulatory concern. It is to prevent crime, protect against reputational risk, and avoid the massive cost incurred when institutions are used by bad actors to commit, fund, or hide the proceeds of crime.