Both the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) mandate that covered financial entities—and this includes all banking institutions, virtually all money service businesses, and many cash-intensive non-bank businesses—establish an Anti Money Laundering (AML) compliance program.

Compliance is not an optional choice, and that imposes costs. The good news is that the costs of compliance can be managed relative to each business’ risk profile with respect to money laundering. In other words, a smaller business with limited risk can establish an effective compliance program that will stand up to scrutiny at a lower cost than a big bank with lots of foreign transactions. FinCEN and OFAC promote risk-based compliance programs in recognition of this reality.

However, every business that is covered by BSA/AML requirements should be looking at similar factors in building a risk profile, the first step toward a compliance program. The risk factors common to all financial businesses include business lines (type of business function), customers (meaning any person or entity that can engage in financial transactions), products and services, and location. … Continue reading