21 October 2017
Thomas Hook

Thom Hook

Thomas Hook - Pegasystems Inc.

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AML Compliance Failure: The Gift that Keeps on Giving

30 January 2017  |  3866 views  |  0

It’s no state secret that Anti-Money Laundering (AML) compliance failures can cause serious harm. But what may not be obvious is that by the time the failure has made it into the public domain, the bank has been suffering the repercussions of that failure for years. It is the gift that keeps on giving.

A compliance failure can have lasting effects on your organization and plague an institution for years to come. It’s not just a one shot deal, the hits happen in stages. The starting point can be with internal audit or a regulator identifying the issue. If audit originally identified the issue, then you can double the following steps (once with audit and once with the regulator). The examination/investigation can take months or more and then there is a back and forth dialogue over the findings.  Once the findings are agreed upon, then there is a back and forth dialogue over the remedial actions that must be taken to address the issues. The bank then has to complete the required remedial actions by a specified deadline, which could be up to a year down the road. And don’t forget – that’s not the end. Once one regulator identifies a problem, blood is in the water and other regulators will come to review as well. Some banks have multiple regulators in a single country (e.g., in the US) or are governed by various regulators across the globe (for global banks), so you can multiply the headaches.

In most instances this will all happen in private with the public having little idea of what happened. But in some instances (e.g., egregious failures or inability to remedy failures), the dirty laundry gets aired and findings/fines/penalties are put in the public domain. So on top of the compliance costs, fines, and penalties, the bank will suffer lasting reputational damage.  Along with public distrust, the regulators also distrust the AML compliance program and will continue to be fierce in future examinations. The hits will keep coming.

Don’t take my word for it. See the recent news of a global money transmitter being hit with an enormous fine for AML compliance failures. The story has blanketed the news, highlighting the failures and the fines which came from multiple US regulators (Financial Crimes Enforcement Network, US Department of Justice, and the Federal Trade Commission). While the AML failures occurred between 2004 and 2012 and investigations into this activity were ongoing in early 2013, the details and final agreement didn’t hit the news until 2017. By all accounts, the AML compliance program at the institution has improved since 2012 but this is overshadowed by the current news of the past AML compliance failures and the fraud that was facilitated through the institution. 

Yes, this is an extreme example of what can happen but it is a good cautionary tale. Make compliance a priority because if you don’t, you may just receive a gift that keeps on giving.


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job title Director - Risk, Compliance & Onboarding
location Cambridge
member since 2016
Summary profile See full profile »
Thom provides industry expertise to the development of Pega KYC and CLM and other financial crime compliance solutions. With several years of AML and Sanctions experience, Thom has worked in audit, co...

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