The Arizona Bankers Association and The Phoenix FBI presents The Financial Institutions Fraud and Security Seminar

Transcription

1 The Arizona Bankers Association and The Phoenix FBI presents The Financial Institutions Fraud and Security Seminar AML, Financial Crime and Related Activities: Where are we now?

2 John J. Byrne, CAMS Vice Chairman AML RightSource

3 Agenda/Hot Topics AML/Financial Crime Reform Issues in 2018 Collateral impact of risk decisions on financial access Elder Abuse Human Trafficking BSA coverage beyond banks Corporate Culture

4 JOSEPH M. OTTING COMPTROLLER OF THE CURRENCY While regulators and the industry share a commitment to fighting money laundering and other illegal activities, the process for complying with current BSA/AML laws and regulations has become inefficient and costly. True but which way is up??

5 Reform Language (to date) Key Provisions in the House Proposal: Increase the Currency Transaction Reports (CTRs) threshold to $30,000, and update the Suspicious Activity Report (SAR) threshold $10,000; This section also permits a domestic financial group to share SARs with its foreign branch or affiliate under certain circumstances; Creates a no-action process for FinCEN inquiries; Require the Treasury Department to establish and make public its priorities to combat anti-money laundering and the financing of terrorism (AML/CFT); Direct the Treasury Department to provide legal certainty to financial institutions that use technological innovation in AML programs; Studies on the usefulness of BSA reporting and a 5 year study on the effectiveness of incorporation practices and 18 month safe harbor for CDD rule compliance

6 De-risking The upward trend in U.S. enforcement actions and fines against banks, along with the existing regulatory complexity in the AML/CFT/sanctions field, result in significantly increased compliance costs for financial institutions. Financial institutions consistently note that decreased profitability resulting from the increased monitoring and compliance costs of AML/CFT regulations as a key driver of derisking. Some reports place the additional burden at upwards of $4 billion annually. One bank reportedly employed 4,000 additional compliance staff in one year, at a cost of $1 billion. According to a 2016 survey by the Association of Certified MoneyLaundering Specialists (ACAMS), three-fifths of respondents cited enhanced regulatory expectations as the greatest AML compliance challenge. Supervisory actions including personal liability of compliance officers for regulatory violations further contributes to escalating costs and challenges.

7 Impacted Communities Foreign financial institutions, including banks and foreign money services providers (e.g., casas de cambio, currency exchanges, and money transmitters). Nonbank financial institutions (e.g., money services businesses; casinos and card clubs; brokers/dealers in securities; and dealers in precious metals, stones, or jewels). Senior foreign political figures and their immediate family members and close associates (collectively known as politically exposed persons (PEP)). 19 Nonresident alien (NRA) 20 Foreign corporations and domestic business entities, particularly offshore corporations (such as domestic shell companies and Private Investment Companies (PIC) and international business corporations (IBC)) 21 located in higher-risk geographic locations. Deposit brokers, particularly foreign deposit brokers. Cash-intensive businesses (e.g., convenience stores, restaurants, retail stores, liquor stores, cigarette distributors, privately owned ATMs, vending machine operators, and parking garages). Nongovernmental organizations and charities (foreign and domestic). Professional service providers (e.g., attorneys, accountants, doctors, or real estate brokers).

8 Elder Abuse The Justice Department is targeting schemes such as the following: Lottery phone scams, in which callers convince seniors that a large fee or taxes must be paid before one can receive lottery winnings; Grandparent scams, which convince seniors that their grandchildren have been arrested and need bail money; Romance scams, which lull victims to believe that their online paramour needs funds for a U.S. visit or some other purpose; IRS imposter schemes, which defraud victims by posing as IRS agents and claiming that victims owe back taxes; Guardianship schemes, which siphon seniors financial resources into the bank accounts of deceitful relatives or guardians. Advance Fee Schemes, which promise big payouts in the future if victims provide financial assistance up front.

9 DHS and Human Trafficking The Blue Campaign is the unified voice for the U.S. Department of Homeland Security s (DHS) efforts to combat human trafficking. Working in collaboration with law enforcement, government, non-governmental and private organizations, the Blue Campaign strives to protect the basic right of freedom and to bring those who exploit human lives to justice.

10 Partnering with Private Sector

11 Example of Working Together

12 Polaris Study Results

13 IMB Red Flags High volume transfers Consistent transfers to source countries Seemingly unrelated accounts transferring to same account Repetitive charges Low or high charges for supposed services Low or no normal expenditures: Payroll Social security contributions No utility payments for physical businesses Underreported annual income

14 Key Takeaways Training Stay Current Close cooperation with law enforcement Improve the culture Be proactive (and regulators need to encourage same)