Recent anti-money laundering enforcement actions: lessons to be learned at others' expense.(PATRIOT Act of 2001)

Abstract

Purpose--To draw lessons learned from recent anti-money laundering enforcement actions.

Design/methodology/approach--After providing a brief introduction to the AML regime, this article reviews the recent high-profile enforcement actions. The article then examines what compliance lessons can be learned from these recent cases. Put differently, the article attempts to identify those measures that firms can take now to avoid being subject to headline-grabbing enforcement actions in the future.

Findings--Lessons learned from key recent enforcement actions include the following: SAR filings matter and ensuring an adequate SAR regime means ensuring both systems and staffing are commensurate with an institution's activities; an AML program can only function well if it is calibrated properly to the risks that the institution's businesses face; business growth needs to be accompanied by AML compliance growth; as institutions expand globally, they need to consider how to apply their AML programs across geographies and to ensure that common best practices are being followed by all employees, wherever located, and financial institutions must ensure not only that they have written policies and procedures, but also that those procedures are followed in practice.

Originality/value--Draws the most important lessons learned from recent key anti-money laundering enforcement actions.

Keywords Money laundering, Law enforcement

Paper type General review

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Anti-money laundering ("AML") compliance is consistently rated by financial services firms of all kinds as one of their most pressing challenges [1]. In the wake of the terrorist attacks of September 11, 2001, and the subsequent enactment of the USA PATRIOT Act ("Patriot Act"), financial services organizations are being pressed harder than ever to develop robust AML programs that enable them to monitor, identify, and report suspicious transactions and to take other pro-active steps to prevent money laundering, terrorist financing, and other illicit activities.

Firms that fail to live up to today's high level of expectations face significant consequences, including enforcement actions and accompanying reputational damage. There have been numerous high-profile enforcement actions, often involving significant penalties, since the enactment of the Patriot Act; the past 12 months have demonstrated the continuation, and amplification, of this trend [2]. For example, last December, ABN AMRO Bank N.V. ("ABN AMRO") paid a record $80 million civil penalty to settle charges based on systemic defects in the bank's internal controls to ensure compliance with US AML laws and sanctions regimes. In April 2006, BankAtlantic, a Florida-based savings institution, settled a $10 million enforcement action for failure to implement an adequate AML program that included measures to detect and report money laundering and other suspicious activity. One month later, the SEC brought its first-ever enforcement action under the Patriot Act, charging broker-dealer Crowell, Weedon & Co. with failing properly to document its Patriot Act required customer identification program.

After providing a brief introduction to the AML regime, this article reviews the recent key enforcement actions. The article then examines what compliance lessons can be learned from these recent cases. Put differently, the article attempts to identify those measures that firms can take now to avoid being subject to …