By their very nature, money launderers will go to great lengths to cover their tracks. In the process, they use the normal activities of legitimate businesses like banks, credit unions, money service businesses, and other financial services organizations to help them “clean” ill-gotten gains. One of the strongest tools financial institutions have in combating the covert use of their services for illegal ends is to Know Your Customer (KYC).

The Mandate for BSA/AML Compliance

The problem is that the legitimate businesses used for money laundering may inadvertently fall into non-compliance with Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) requirements. Since the flow of funds through money laundering can be used to finance drug-related, terrorist, or other illegal activities, the issue has been raised to the level of national security policy. There is little wriggle room: virtually all financial services businesses are responsible for designing and implementing risk-based anti-money laundering controls.

Several units of the U.S. Department of the Treasury are charged with promoting, monitoring, and enforcing compliance with anti-money laundering rules, including the Financial Crimes Enforcement Network (FinCEN), which has oversight of the system as designated administrator for BSA/AML compliance. Financial institutions that are found to have facilitated money laundering, even if inadvertently, can be heavily fined. … Continue reading

It is well understood that money launderers use deceit or theft to capture the processes of financial entities for illicit purposes. As a result, your AML compliance program must implement internal control designs that increase the chances of preventing or detecting such activities.

Financial managers and auditors are familiar with the concept and implementation of internal controls. The difference is that controls as part of an AML compliance program will be focused on mitigating risks discovered in a money laundering risk assessment. Further, internal controls as part of an AML program must be designed to generate the mandated reports and other surveillance, reporting, and records retention required by the Banking Secrecy Act, FinCEN and the Office of Foreign Assets Control, among others. … Continue reading