RESULTS OF THE 2017 RSM AML SURVEY

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2 RESULTS OF THE 2017 RSM AML SURVEY ABA Money Laundering Enforcement Conference December 4, 2017

3 Presenters Patricio Perez Partner, Risk Advisory Services, RSM Nick Mustafa Director, Risk Advisory Services, RSM Christopher Dick Manager, Risk Advisory Services, RSM

4 Survey objectives The overall objective of the research was to profile AML departments of U.S.-based commercial banks ($500MM and $20B). Specifically, the profile included the following dimensions: AML department size and structure Operating philosophy Costs Compliance processes Current technology infrastructure used for transaction monitoring

5 Staffing & Budgets Expectations for BSA/AML Budget at Banks Assets $1B-<$20B Decrease 3% Expected % Increase 4% 13% 51%+ Remain the Same 48% $250,000 Total annual operating budget for BSA/AML Assets $1B-<$20B (median) Increase 49% 34% 36% 21%-50% 11%-20% 5%-10% Avg. = $460,016 Range = $10,000 - $6,000,000 13% What is your organization s total annual operating budget for BSA/AML compliance? (n = 44) In the next 12 months, do you expect your organization s annual operating budget to (n = 74) Median % = 15% Avg. % = 18% Range = 3% - 120% (n = 33) <5% Source: AML Practices Assessment Research Barlow Research ( )

6 Nearly thirty percent of banks expected to increase FTEs over the next 12 months; many that expected to increase FTEs have experienced changes in volume Increase Remain the same Expectations for # of FTEs 29% Top Reasons for Change Top reasons for increase: Looking into purchasing software that will help with the manual tracking. New policy/software to stay efficient (21%) Volume change (20%) Our SAR filings have tripled year-overyear and the number of cases has Acquisition/merger change (11%) increased 26% year-over-year. In addition, after a core conversion in first quarter of 2016, our department now prepares and files all CTRs for 16 branches. Decrease 1% 70% In the next 12 months, do you expect the number of FTE Category employees responsible 1 for BSA/AML and sanctions compliance to (n = 126) Top reasons to remain the same: No change needed (34%) Staff personnel change (20%) We are a small community bank that has been working with the same core people for years. Explain why your organization s FTE employees will increase, decrease or remain the same. (n = 98) Source: AML Practices Assessment Research Barlow Research ( )

7 Banks were least satisfied with the efficiency of their BSA/AML function Effectiveness of your organization s BSA/AML function Quality of your organization s overall BSA/AML risk assessment Board of Directors involvement in your organization s BSA/AML function Efficiency of your organization s BSA/AML function Satisfaction with BSA/AML 40% 56% 51% 50% 85% 95% 95% 86% 46% 35% 39% 44% 14% 9% 4% 4% 1% 2% 5% n = 121 n = 121 n = 120 n = 120 0% 20% 40% 60% 80% 100% Very Satisfied Somewhat Satisfied Neutral Somewhat Dissatisfied Very Dissatisfied Q: How satisfied are you with the Source: AML Practices Assessment Research Barlow Research ( )

8 The range of times reported for key activities suggest opportunities to increase efficiency and to mitigate risk Average time required (in hours) to: Total sample Mean Median Mode Range Conduct Enhanced Due Diligence (EDD) Investigate an escalated alert Clear a suspicious activity alert Q: How long, on average, does it take your organization to Source: AML Practices Assessment Research Barlow Research ( )

9 Banks looking to increase their budget were more focused on using software to make the process of identifying suspicious activity more efficient Primary Objective for BSA/AML Software 100% 5% 2% 2% 7% Risk score customers more effectively 80% 38% 24% Satisfy regulators 60% Make process more efficient 40% 20% 54% 68% More effectively identify suspicious activity 0% Statistically significant difference Expect operating budget to increase Do not expect operating budget to increase Operating Budget Expectations Q: Does your organization use software to identify suspicious activity? (Increasing operating budget: n = 37; Remain the same/decrease operating budget: n = 55) Based to those that use software to identify suspicious activity Source: AML Practices Assessment Research Barlow Research ( )

10 Overview of risk tolerances and perceptions Customer, Product and Geographical Risks Inherent risk of products and services 4% 46% 50% Inherent risk of customer base 7% 47% 45% Geographical risk of customers' locations and transactions 15% 47% 38% 0% 20% 40% 60% 80% 100% High Medium Low Q: How would you characterize the (n = 125) Source: AML Practices Assessment Research Barlow Research ( )

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