The Changes in the US AML/ATF Arena

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The Changes in the US AML/ATF Arena

• Rudolph F. Zepeda, Jr.
• Federal Reserve Bank of Atlanta
• Miami Branch

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Almost six years after the USA Patriot Act
toughened banks' anti-laundering requirements,
large banking companies continue to face massive
fines for failures in their programs. More large
fines are undoubtedly on their way
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Banks Can Never Rest

• Every time you think you have it covered, you
  constantly have to update what you do
• ABN Amro Holding NV 80 million but may receive a
  second penalty of nearly 500 million
• FINCEN keeps updating its guidelines.
• http//www.fincen.gov/pub_main.html

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U.S. Governments Concern

• Treasury Dept. considering sweeping structural
  changes in U.S. financial services system, such
  as, consolidating regulatory agencies and
  combining charters of federal and savings
  institutions.
• May put the primary responsibility on blocking
  those transactions on financial institutions and
  other payment processors that have banking
  relationships with Internet gambling companies.

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Law Enforcement Latest Concern

• Stop Money Laundering by
• Increasing fines and sanctions
• Forfeiture of assets which revert to the State
• Utilize Cash Transaction Reports (CTRs) to
  follow the Money
• Stop Terrorist Financing
• Increasing intelligence utilizing SARs
• Consider the newest technological advances such
  as stored value cards as a vehicle to move funds.

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Bankers Concerns

• Costs continue to increase in order to establish
  an efficient AML/ATF program
• In trained personnel
• Information technology (IT)
• Enterprise-wide programs
• Throwing money at the problem doesnt solve it
  and despite the cost can still result in fines
  and sanctions. (Union Bank)
• Direct competition from non-regulated entities
• Impatient regulators, who tolerated problems in
  the past because systems were being acquired.

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Legislators Concern

• The creation of a single, monolithic federal bank
  regulator, given the enormous power bank
  regulators have over financial institutions.
• Increasing regulatory burden
• Lessons from the recent sub-prime crisis require
  further regulation of non-bank financial
  institutions

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Regulators Concerns

• More detailed regulations and laws are on their
  way
• Banks have had 6 years to comply
• Bank directors have to take AML training
  seriously and incorporate into culture

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Regulators Concerns

• The days when bank management tells us that a new
  system or new AML officer hires need time to
  improve the existing system are over.
• If they have not made progress despite spending
  within a 12 month period
• Supervisory actions and fines will increase if no
  progress has been made in an appropriate time.

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Regulators Concerns

• With the new legislation and GAO scrutiny
• Require more experienced personnel and
• Update examiners knowledge on new software and
  technology
• Expand AML examination programs to
• Large Banks
• Community Banks
• And the need for SEC and NASD to step up AML
  compliance on broker-dealers.

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Basic Elements of Sound AML Program for
Broker-Dealers

• A comprehensive assessment in order to determine
  the risks certain products and product groups
  pose for money laundering and terrorist
  financing.
• A complete analysis to understand the universe of
  all transaction types the institution utilizes.
• A comprehensive assessment to determine the risk
  the customer base poses for money laundering and
  terrorist financing.
• Evaluate whether the commercial AML monitoring
  system to be implemented can be customized to the
  specific needs and trading activity of the
  broker-dealer, or whether the logic of the
  detection scenarios is "set in stone."
• Determine the amount of post-implementation
  support the broker-dealer can expect from an AML
  monitoring system vendor.

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Major Changes Affecting the Caribbean

• Correspondent Bank Accounts
• Heightened scrutiny due to new issuance of
  updated Bank Secrecy Act/Anti-Money Laundering
  Examination Manual
• Outlawing internet gambling
• The shift by money launderers to trade-based
  money laundering.
• The need to look at AML enterprise-wide