Kenneth L. Bryant

Anti-Money Laundering Combating the Financing of Terrorism

Background and History

Since January 2005, there have been numerous news articles concerning the lack of guidance on the Bank Secrecy Act (BSA) and other Anti-Money Laundering regulations.  Many in the private sector believe that the enforcement and examination of their efforts to prevent money laundering are inconsistent.  On the other hand, the Financial Crimes Enforcement Network Director William Fox notes that his agency is equally concerned about the inconsistencies in the regulations.  Industry observers contend that the rules and their enforcement are disproportionately affecting smaller firms, forcing them to sell their assets to larger institutions. Letters sent to various regulators have recommended a joint training session for bankers and examiners on the BSA and other similar regulations, centralized guidance from the agencies, and an open dialogue with industry about the rules as well as standards and practices.  Moreover, joint steering groups are rapidly becoming emerging best practice for AML regimes and have to date proven immeasurably valuable to the jurisdictions in which they operate.

THE FOLLOWING IS FOR DISCUSSION PURPOSES:

Purpose and Scope

The purpose of the AML/CFT Industry Standards and Best Practices Group (Group) is to establish a leadership position in brokering an understanding between the regulators and the financial industry.  The Group would contribute to both compliance, regulatory and law enforcement efforts. This would be done by analyzing and publishing current trends and emerging issues regarding the ways by which the financial sector is working to comply with US and International regulatory requirements (this would be industry and size specific). The scope might also include working with the government agencies to help them to understand where the perceived inconsistencies of enforcement exist.

Benefits of Participation

• An opportunity to participate in establishing a set of exemplary compliance program methods, which may be defined as:

   

Continuously improving processes

 

Activities and programs that are in keeping with the best possible evidence about what works in a particular context, e.g., small banks, large MSBs, NASD member firms, etc.

 

Compliance practices and work processes that lead to superior audit results

 

Strategies, activities, or approaches that have been shown through research and evaluation to be effective.

 

• Giving members an opportunity to interact with players whom they might not have access to otherwise, e.g. government, etc.

 

• Members gaining access to processes that have the implicit approval of the entire BSA examiner's staff.

 

• Access to information that would provide a guiding, practical application of identified best practices that may reduce both compliance AND operational risk for members’ firms.

 

Goals

 

• Conducting typologies to define the processes, practices, and systems identified in AML compliance that perform exceptionally well and are widely recognized by a majority of institutional players and their regulators as improving financial institutions’ performance and efficiency in BSA compliance.

 

• Liaising with government agencies and the financial services industry to foster a “we’re all on the same side” atmosphere, especially as it concerns the sponsoring organization's members.

 

• Conducting a benchmarking exercise that will provide the sponsoring organization's members effective access to actionable information, as well as giving members an opportunity to participate in a large scale exercise to set the agenda with regulators on equal terms with the financial industry.

 

• The Group might be organized by a board, committees, subcommittees, that would be further organized by (for example):

 

Type of institution, e.g., Bank, MSB, etc.

 

Size of institution

 

Size of compliance budget

 

Size of compliance staff

 

Dedicated staff

 

IT compliance, including:

 

    System usage

   

    System analysis

 

    System architectures

 

    Data analysis (e.g., quality)

 

• All analyses would be refined by specific attention to compliance methods for specific regulations, for example:

 

Transaction monitoring

 

326 procedures

 

313 procedures

 

314a/b procedures

 

Suspicious activity detection and reporting

 

Documentation standards (format, etc)

 

Regulatory response management

 

Training and Education

 

Financial Intelligence Unit (FIU) activities

 

Others.

 

Operating Costs

 

There would be minimal costs incurred by the sponsoring association to organize this Group.  The Group could be promoted through a newsletter and/or website and have special meetings for Group members/committees during a regular annual meeting.  Minor expenses for organizational duties would be covered by the sponsoring association.

 

Revenues

 

The results should be free to participating firms/members, but could be marketed and sold to other interested parties.  Sponsorships for the study could potentially be solicited as well.

 

Leadership

 

Kenneth L. Bryant and Howard Steiner have volunteered to co-Chair the Group and work with the sponsoring association to organize sub-committees.  The committees will obtain data through surveys.  Data obtained through survey responses will be kept in strict confidence with limited access by any outside party.  The sub-committees will construct the surveys in order to provide information firms can use to evaluate their own efforts and provide a measure of progress toward increased automation and common compliance standards.

Moving Forward

The idea of the AML/CFT Industry Standards and Best Practices Group is the brain child of Kenneth L. Bryant of Bryant & Associates and Howard Steiner of Impact AML.  We are currently seeking a professional association to provide sponsorship of the Group.  We are pleased to announce that effective September 1, 2006, we have agreed to develop the Council of Standards and Practices for the National Money Transmitters Association.  In addition, if anyone is interested in participating as a Committee Chair or Member, please don't hesitate to contact us.  We welcome and appreciate your interest!