Is Your AML Compliance Program Suffering From These 5 Common Deficiencies?

Anti-money laundering (AML) compliance remains a challenge for many American financial institutions that continue to struggle with implementing stringent internal controls as the regulatory landscape continues to shift and change.

An effective AML program depends on how well organizations are able to verify the identity of their customers, assess risk and monitor and audit daily customer transaction activity. To work properly, an AML program must have the full support of top management as well as a commitment throughout the organization to have the proper systems and processes in place and follow those processes despite internal challenges.

AML programs that consistently fail appear to have these five common deficiencies:

Lack of resources. Often, AML programs and the people charged with implementing and managing them suffer from a lack of resources and management buy-in. The AML compliance function is heavily dependent on technology resources, and when those are short-changed, the program suffers.

Lack of ownership. A compliance program is only as good as the people tasked with implementing and managing it. When chasing revenue, employees may choose more risky transactions unless they are held accountable for compliance.

Lack of risk management. Many organizations do not allocate enough resources to support adequate risk management. Financial institutions that lack the ability to measure and manage risk — including enterprise risk assessment, customer risk assessment and OFAC/sanctions risk assessment — will fail the AML compliance test.

Lack of SAR filing standards. Regulatory agencies have complained that financial institutions file too many Suspicious Activity Reports (SARs) that do not include enough information to warrant a SAR filing. A SARs program needs to be effectively monitored and managed in order to be effective.

Lack of a multi-pronged approach. While technology and software programs are integral to an effective AML compliance program, monitoring should not be solely dependent on technology. Other important elements — including auditing and monitoring programs — are essential to supplement technology-based screening of transactions.

The Cogdell Law Firm is a boutique law firm focusing on large, complex business and criminal financial-related litigation, including white collar criminal defense, securities fraud, health care fraud investigation, criminal appeals and state criminal defense. When results matter most, contact Dan Cogdell at (713) 426-2244 or