Anti-money laundering has always been an integral part of compliance management. Its importance has, however, increased greatly in the previous two decades and continues to increase. Since AML compliance is such an integral part of compliance, it is also an integral part of most GRC solutions. However, the benefits of GRC solutions go beyond simply helping with compliance – they can also directly reduce AML penalties.

AML Compliance Penalties

AML Money Penalties Can Be Severe

AML compliance penalties need to be taken seriously because they can be enormous. Just last year a bank had to pay a $598 million penalty for AML violations. While this penalty was uncharacteristically large, there are several penalties which go into tens and hundreds of millions of dollars. Banks do not have to be involved in any money laundering for these penalties – there isn’t even a need of any money laundering to happen through the bank to get such a penalty. These penalties are usually based on the controls present within the bank’s network to detect AML related suspicious activity.

The History and the Present of BSA/AML

The Banking Secrecy Act of 1970 was one of the first anti-money laundering acts to be passed in the United States. It is important to understand why it was created if we want to understand how it works. The main target of BSA at the time was drug cartels. There was a lot of concern about drugs which were ravaging communities and the millions of dollars being earned by international drug cartels from it. The government realized that the drug cartels were laundering money through banks without facing any major obstacles, which revealed a huge vulnerability in our banking network.

The BSA required banks to create a paper trail of large transactions and to verify the information of both the sender and the receiver in such cases. Previously it was possible to have money wired without it raising any red flags in the system. The BSA was treading new ground – several groups took the matter to court because they thought that BSA was unconstitutional since it may harm the right to privacy.

See How Banks can Ensure Compliance with BSA/AML Regulations.

BSA was a major concern during these times but the penalties associated with it were not so severe. If a bank did unwittingly allow a suspicious transaction to go through, then in the worst case scenario they just made a drug cartel richer.

The focus of BSA/AML compliance has completely changed over the past two decades, and so has the intensity with which regulatory bodies penalize businesses that do not enforce AML compliance adequately. There is a very simple reason why – after 9/11, the focus of BSA/AML changed from drug cartels to terrorists. Terrorist networks need a lot of funding to achieve their objectives and this funding was being provided to them from all over the world. Cutting down this source of funding is a major part of anti-terrorism measures, which is why AML compliance has now become such an integral issue.

How GRC Can Help

If you look into the consent orders published by the Office of the Comptroller of the Currency one thing jumps out – every major money penalty involves the lack of controls. Businesses don’t get fined because a suspicious transaction went through unchecked – they are fined because they didn’t have the mechanism in place to detect and stop such transactions. This is where GRC can play an integral role in helping businesses deal with AML compliance penalties. If a business is found to be actively aiding money launderers the case is different – but the penalties are almost always civil money penalties, given out not for crimes but for not having adequate controls. GRC introduces the controls which help businesses improve their BSA/AML compliance measures. GRC also includes training management systems, which also helps businesses train their employees for AML. This means that when regulatory bodies perform an audit and find that a business has implemented GRC, with a complete audit trail for all processes, they are much less likely to levy a huge fine on the business.

If you want to improve your business’s AML coverage and are looking at how GRC can help, get in touch with our team. We will listen to what you need and then show you GRC tools that can help your business achieve higher levels of AML compliance.

About the Company

360factors, Inc. (Austin, TX) helps companies improve business performance by reducing risk and ensuring compliance. Predict360, its flagship software product, vertically integrates regulations and requirements, policies and procedures management, risks and controls, audit management and inspections, and on-line training and qualifications, in a single cloud-based platform based on artificial intelligence.

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