3 key factors to enhancing compliance on BSA/AML laws

Money laundering is a worldwide problem that costs consumers billions each year. The estimated amount laundered globally in one year is $800 billion to $2 trillion in current U.S. dollars, according to the United Nations Office on Drugs and Crime.

While governments and corporations have put a dent in stopping money laundering — the Internal Revenue Service investigated 1,312 cases in 2014, resulting in 934 indictments — criminal groups are still largely winning the battle.

Yet there are ways to reverse the trend.

Under the Banking Secrecy Act (BSA)/Anti-Money Laundering (AML) laws, all financial institutions must have procedures in place to identify potential problem accounts. This includes even the smallest financial institutions. In fact, in one recent citation, Financial Crimes Enforcement Network (FinCEN) fined a credit union with $4 million in assets and only five employees $300,000 for welcoming members “far beyond its field of membership, without adequate policies and procedures to ensure AML compliance.”

The three basic steps for credit unions to complete appropriate risk mitigation are member identification, implementing silo approaches to banking and identifying suspicious activity.

Member Identification

Knowing your account holders is not only good business; it is now your legal obligation. The U.S. Patriot Act requires all credit unions to have updated information and legal identification for each of their members.

Appropriate identification allows credit unions to keep tabs on open accounts and transactional histories. Just a few tactics you may consider include verifying member data, maintaining good records and developing transactional triggers that will alert staff to potential issues.

Savvy credit unions have also learned that knowing members is a must for targeted marketing. Being in touch with who engages with your credit union, and in which ways, provides the opportunity to generate member classifications, scoring members based on account activity and sorting by patterns.

Silos of Banking

Many credit unions have different channels to deliver individual services, making it more difficult to track overall member activity. We all know the risks presented by siloed operations. Yet, when it comes to BSA and AML compliance, running all transactional information through a single system can make it easier to track and analyze member activity patterns. It also provides an avenue for individual account holders to be linked to all the products and services to which they have subscribed.

Identifying Suspicious Activity

There are many types of account activity that will raise flags when analyzing transactional data. Credit unions seeing these activities should mark the accounts for a closer watch and take action if needed. These may include:

  • Movements of funds in excess of $10,000
  • Multiple withdrawals from several locations in a short period
  • Unusual wired fund activity
  • Total deposits to multiple accounts in a short period totaling more than $10,000
  • Excessive number of small withdrawals from multiple locations
  • Wire transfer activity moving back and forth between accounts or sending large sums

Of course, it will be important to develop policies and procedures for handling AML violation cases. Annual training to keep tenured staff up-to-date and new staff up-to-speed is a best practice for all credit unions.

Aligning your strategies with these three processes can increase credit union compliance with BSA/ALM laws and help mitigate the risk of money-laundering activities. Institutions can also partner with outside vendors to provide software capable of monitoring and reporting on account activity – and raising flags when suspicious transactions are taking place.

Karan Bhalla

Karan Bhalla

Karan Bhalla is the CEO of CU Rise Analytics and who has almost two decades of financial services and data analytics experience. CU Rise Analytics is a global CUSO helping ... Web: https://www.cu-rise.com Details