Money laundering continues to be a significant problem. The precise amount involved in the global economy is very hard to measure with estimates ranging from $1.5 to $4 trillion.

For compliance officers, money laundering is not a new risk, especially since the USA PATRIOT Act was passed in 2001, which imposed a new set of laws and regulations on the financial industry. But make no mistake, money launderers are sophisticated criminals and very resourceful. This makes compliance even more difficult. 

Money launderers have new techniques for laundering proceeds which they can mix and match as needed, including wire transfers, e-banking and pre-paid cards. There are literally hundreds of different ways to launder money. For example, instead of using bulk cash transfers, criminals can use prepaid cards, online money accounts and other products to store the value of the proceeds for later use. Money has become virtualized.

Even more problematic for compliance officers is detecting or preventing “reverse money laundering schemes whereby legal money is used to fund illegal actions.

Compliance officers need to tighten their focus on “suspicious transactions.” Money launderers usually enlist legal and/or accounting professions to carry out their schemes.

At its core, an effective anti-money laundering program needs to have two basic components:

1. A risk-triggered approach (“RTA”). The RTA attempts to improve transaction monitoring systems to identify potential suspicious behavior. When such issues are flagged, there needs to be follow through. Compliance approvals need to be obtained before any further actions are taken. Too often, business officers can overrule compliance holds on an account or a transaction. If an RTA is going to work, compliance has to be given adequate authority.

2. Training of all personnel. In many cases, training is limited and often without employee evaluation. The more emphasis placed on training, the greater the awareness and sensitivity to potential money laundering risks.