Changing Times

It really comes down to the fact that, as all laws and regulations across the world increase and affect other types of institutions, there is a larger need for additional staff that are AML knowledgeable. This is really going to have an affect on what we’re seeing as an association on training. Internal training is not going to be enough and external training will be needed, especially as these new industries are mandated to follow additional AML requirements. There’s a huge need for training, and international bodies have put out a paper on training and how to implement an effective training program. There is a certain level of growth happening in the AML area - even our association has grown by thousands of members, simply because of people entering the field. A couple years ago, we were at about 4,000 members, while we’re now close to 9,000.

This growth is equally as prominent in European markets as it is in the US. One of the biggest effects on Europe is the enhanced due diligence requirements on beneficial owners, where companies really have to dig into their clients to find out who is a beneficial owner. This may lead to the need for more resources to do additional analysis and that itself takes time, as well as money. Instantly, there’s a cost factor that these institutions have to bear while operating in an economy that is cutting back. AML professionals may also see some repercussions with privacy issues, especially in Europe with regard to beneficial owner requirements. With the increase in the number of businesses that now necessitate reports on AML, such as leasing and finance companies, there is again a need for AML staff that are both knowledgeable, not only of AML, but also in these new industries that have additional requirements.

We’re putting out a salary survey for 2008, and already we have seen salaries grow, so again, in an economy that has slowed down, last year’s AML salaries have increased at many of the job levels. This is an effect of what the regulations and the mandates are doing to institutions and their resources, so while it may be good on the individual economy level, it’s tough when you’re operating in an economy that is as tight as today’s.

Another thing that Europe is experiencing is that one of the EU’s directives requires institutions to continually monitor its customers: not only monitoring certain customers for the first 90 days, but monitoring all customers continuously. This will definitely have an impact. There will be a need for stronger, more robust transaction monitoring systems and a lot of current in-house solutions just won’t be able to cut it. Companies will need to be going into markets to purchase the largest solutions to monitor exactly what they have never had to monitor before. So once again they’re going to have to be spending money in an economy that’s making cutbacks.

Hot topic

Research continues to show that institutions are still unsure about how to respond to the challenges brought up by AML. While AML certainly may be a hot topic, the only reason it has become more of an issue for institutions is because of the focus their regulators put on the area in light of difficulties in the marketplace. There are a lot of compliance issues out there that institutions have a tough time dealing with - it’s just that AML has been the concentration of late. What we’re seeing globally, for both the US and for Europe, is a focus on risk-based AML programs. What this means, is that each institution has to customize and tailor their program to the risks inherent in that institution, which also needs to be identified. This makes it difficult because an institution doesn’t have a template or a best practice that they can follow. They have to review their own operations and determine their own risk and develop a program around it, and that is what makes it very tough.

Unfortunately, risk-based programs really are the only way to take a look at AML compliance in today’s market. We can see with the EU’s third directive how there’s more of a focus on a risk-based approach to AML monitoring and compliance and in the US, there has always been that focus. But with each institution being different, each retail bank being different, the customer focus being different, the tailoring that is necessary to maintain an efficient and effective AML compliance program comes hand in hand with the risk.

The plus side is that risk management is very familiar to financial institutions, and as we approach these risk-based AML programs, we will see them fitting into the risk management initiatives that are already in place within institutions. As a former consultant, I have seen in a number of institutions that the most effective AML compliance programs are those that are a part of the risk compliance department: this is because the institution is able to not only look at compliance as a style of environment, but also relate compliance to risks in operations, in new products and in marketing. By encompassing everything, institutions have compliance built into their risk areas and it tends to be very effective.

One of the questions raised by risk management is whether regulations can move fast enough to prove worthwhile. This isn’t to put blame anywhere; it’s just that it takes time to analyze the effects a regulation will have. Regulation tends to happen after an incident has taken place, as opposed to being put in place before something happens, and s ome of these regulations relate to the EU, such as knowing your customer better, and that’s likely to have a negative effect on privacy issues. The second question this raises is what leads can the industry give to regulators on AML issues? The answer to that is in the ways institutions develop a very solid, open communication with the regulators. As a former regulator myself, I always told my portfolio of banks that I was there for them. ‘Communicate with me’. Regulators aren’t there to monitoring institutions to do something wrong, they are there to help, and the sooner regulators know something is going on, the sooner they can help the institution and move it along the chain so that the Government may be able to address it with some form of a solid regulation.

Leading the way

In the US, after 9/11, there’s a stricter focus on AML regulations, and because of other occurrences of financial terrorism, especially in Europe, we see that the market is moving along quickly with the EU directive. So even though the US and Europe may differ in the progress on certain issues, the international community overall is really embedding the framework provided by international guidance. This is important guidance that each country can use to build, develop and implement their AML laws directly. I was surprised to see that Europe is now leading the charge with extending the effects of AML requirements to other types of companies that receive certain monetary amounts.

What is most important in ensuring that an institution is compliant with the right guidelines is for the international banking community to have a global client structure. This way they can coordinate the efforts between the regional head offices or the regional business development lines. That way, the departments work together as one, and we don’t have that environment where a US branch is working on its own and not communicating with its European branch, resulting in a crossover where regulation lines may be blurred. It’s very important to ensure that through training, and by developing an external network, institutions learn those best practices that are available in the risk and compliance areas.

And with the area still growing and more people coming, we’re seeing that training has become so important that it needs to make organisations stand out in their communities. Look at ten years ago. What institution had a KYC analyst? Now many institutions have dozens of them, especially the large ones, and that’s a further effect on the resources, the need for people to stand out. That’s one of the biggest needs we see as the certification part for us too. It’s just the domino effect across the industry.

The growth of ACAMS

The Association of Certified Anti-Money Laundering Specialists (ACAMS) is a membership-based organisation that serves as a platform for career development and professional networking for individuals in a wide range of industries, including the rapidly expanding AML field. The organisation provides resources for financial institutions and related businesses that help train, identify and locate practitioners who specialise in money laundering control policies, procedures and regulations.

The mission of ACAMS is to advance the professional knowledge, skills and experience of those dedicated to the detection and prevention of money laundering around the world, and to promote the development and implementation of sound anti-money laundering policies and procedures.

ACAMS grew from an expanding need to identify professionals with clearly defined expertise in the field of money laundering detection, prevention and control. The organisation develops anti-money laundering programs and certifies specialists in financial and non-financial businesses and government agencies, seeking to help compliance officers, anti-money laundering specialists, in-service and retired government regulators and enforcement agents perform their duties well by providing up-to-date information, education, career development and professional networking opportunities.