Wednesday, May 11, 2022
Seeking to share best practices for mitigating financial crime, the ETA and co-authors—INFiN, a Financial Services Alliance; the Money Services Business Association; and The Money Services Round Table—noted that money service businesses (MSBs) are a diverse cohort that needs more than a one-size-fits-all approach to implementing risk-based AML programs.
"The implementation of the AML program will be dependent on the type of the MSB and the nature of its business footprint," the authors wrote. They recommended the following four-pronged approach to documenting AML programs in accordance with FinCEN requirements:
Designing an AML program around these four pillars will help MSBs meet BSA requirements and protect them from being used to facilitate money laundering and terrorist financing, researchers noted, adding that AML programs tend to be the same, regardless of an MSB's size, structure, business model, target market or complexity.
The toxic wave of global financial crime is big and getting bigger, researchers have noted, pointing to Fighting Money Laundering with Intelligent Automation, a February 2021 study by the International Institute for Analytics on the impact of AML and other crimes on the global economy.
"The amount of money laundered is estimated at between 2 and 5 percent of global GDP," the Institute researchers wrote. "The midpoint of that range has over $3 trillion in illicit funds moving annually through the financial services industry. That's several million dollars a minute."
Researchers additionally noted that If the money laundering "industry" were a country, it would have the fourth or fifth largest GDP in the world. However, monitoring the movement of funds is a complicated, costly proposition.
In fact, about 95 percent of suspicious transactions are false positives, they noted, and investigating them is time-consuming and costly and reduces speed of service for law-abiding customers.
Researchers ranked the banking industry's effectiveness at detecting AML activities at under 5 percent, despite an annual spend of $180 billion on compliance-related audits and programs.
As criminals become more sophisticated and adept at leveraging financial technologies to scale money laundering and fund terrorism, industry leaders and researchers urge financial institutions to stop throwing good money after bad and to get smart about AML compliance.
"Detecting and preventing financial crimes is a highspeed game of chess, where the institution has to anticipate the opponents' moves and think several moves ahead," wrote the International Institute for Analytics. "Here financial institutions are at a disadvantage because their fraud and money laundering detection and prevention processes are slow, even after spending billions on technology and staff for monitoring and compliance."
John W. Ryan, president and CEO of the Conference of State Bank Supervisors, remarked that public and private sector support is helping the industry improve financial crime detection, responses and deterrence. "The industry effort to identify and distribute Best Practices for U.S. Money Services Businesses marks a significant advancement in efforts to combat de-risking," he said, commending the trade associations for their due diligence and continued discussions.
A full copy of the ETA and MSB trade association report is available at: www.electran.org/wp-content/uploads/MSB-Best-Practices-v29-5.6.22-FINAL.pdf
The International Institute for Analytics study is available at: www.sas.com/content/dam/SAS/documents/marketing-whitepapers-ebooks/third-party-whitepapers/en/iia-fighting-money-laundering-with-intelligent-automation-112008.pdf
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