The headlines are dominated by FCPA, Roger Clemens and John Edwards.  AML enforcement has come back to business attention. 

There has been a lot of news around the subject of Anti-Money Laundering (AML) laws and the Bank Secrecy Act (BSA) recently.

The Office of the Comptroller of the Currency has been flexing some muscle lately in bringing cease and desist actions against banks.  Even the Vatican had to address some money laundering risks when the United States added it to the watch list of countries vulnerable to money laundering.   

The major criminal cases against companies usually have a common theme – a global breakdown of internal compliance controls and a carefully calculated scheme to violate the law.  The rule is the same for any set of violations – FCPA, OFAC, export controls, AML laws, and others.  In those cases, companies immediately focus on remediation, settlement and overhauling their corporate infrastructure to implement a new set of compliance controls.  It is a difficult process and requires a complete change in corporate governance and culture.

Industry estimates of the costs of compliance with anti-money laundering regulations exceed $5 billion annually.  The cost of compliance is expected to increase each year at a rate of close to 10 percent.   By 2013, the total AML burden will be nearly $6 billion.  That is a lot of money and a lot of effort.   Mid-size banks face real challenges shouldering the burden of anti-money laundering compliance.  

At the core of every compliance program — is KYC (Know Your Customer), risk assessments and transaction monitoring systems.  Many companies use AML compliance management software. 

Global institutions face the risk of compliance silos and need to develop protocols which tie together the entire enterprise.  If suspicious transactions are identified, the analysis and response to such transactions has to be carefully designed.  Many AML programs fall short when it comes to identifying suspicious transactions and making sure they are captured in the SARs reporting system.  Verification and audits of the SARS process has to be an essential element of any AML compliance program.

The Justice Department continues to focus on the movement of trillions of dollars through the US banking system each day to try and identify transfers of illicit funds.  Compliance officers need to redouble their efforts and focus on elevating the importance and execution of AML compliance.