Money laundering was coined as a phrase back in the mafia’s heyday, when Dons funneled dirty money through laundromats to make it look legitimate. It has only continued to grow since the days of cash-only businesses. Now, it’s a global enterprise and one that might make up as much as 5% of the GDP. If you do business globally, then you need internal controls and policies in place to prevent becoming part of this network. An anti-money laundering (AML) compliance program will keep you from violating the legislation designed to prevent fund corruption.

If you’re a member of FINRA (Financial Industry Regulatory Authority), then you must have an AML compliance program in place to stay certified. These programs may seem fraught with legal pitfalls and unclear standards, but creating standards that are based on the pillars of AML compliance, and choosing the right person to implement those standards, will make the task easier.

The Pillars of AML Compliance

Complying with anti-money laundering legislation is best done through a best practices program. FINRA has recommended steps to follow for the best results, though companies may take their own approach. To do so, you should break down the program into four steps:

  1. Designate a BSA Compliance Officer – The BSA is the Bank Secrecy Act, and it covers the overarching umbrella of rules designed to prevent money laundering and fraud. The compliance officer will act as the cornerstone of your entire program.
  2. Develop internal policies and controls – With the assistance of the BSA Officer, your firm needs to establish set standards for avoiding business impropriety. This would cover employee responses to various situations like when a foreign official requests a bribe or when someone asks a company rep to do something illegal.
  3. Set up ongoing training for employees – Training is the key to a successful program. An initial training and ones repeated on an annual basis will keep employees current and compliant as laws change. This training program should also include the creation and distribution of a manual explaining AML issues.
  4. Establish independent testing and reviews – You won’t know if your program is good if no one tests it. Setting up peer reviews and other security measures to ensure employees stay compliant will help find risk in your enterprise.

These four pillars act as the structure for your AML compliance program. They allow you to set and communicate clear guidelines to your employees. However, your compliance program is only as good as the person running it—your BSA Compliance Officer.

Choosing and Vetting a Compliance Officer

Your BSA Compliance Officer is the person who leads the program. They have the responsibility to set up the policies and procedures and they need to ensure employees are following them. Usually, these compliance officers are aided by their own departments or collaborate with others. To effectively manage the program, they will need the following:

  • Supervision under the Board of Directors – The officer will need to report directly to the Board of Directors and not through an intermediary. This is to prevent any situation where the officer is subordinate to an individual who may be under investigation.
  • Advanced knowledge of all pertinent AML issues – It’s obvious that this individual will need to understand AML, but they’ll need to understand it on a legal level. That means having a legal specialist in the position who has the applicable compliance background.
  • A working knowledge of the services and products offered – Your officer is also going to need at least a working knowledge of the financial services and products your firm offers. While you don’t necessarily need them to have hands-on experience, they need to understand the concept.
  • A thorough background check – This check is going to have to be very stringent, as the individual needs to be appointed via the Board of Directors. That means everything they do, and did in the past, is going to come back on the board. You may want to consider using Remote Risk Assessment (RRA) to vet them as a candidate. This means having them take a Background Verification Interview through an automated call center, where they are asked specific relevant questions. The answers are routed through a system that assess risk based on biometric indicators. This is a way to remotely vet candidates and ensure there’s nothing in their past that will make you regret recommending them later.

Your BSA Compliance Officer oversees your entire compliance program through FINRA. They have a lot of responsibility and a lot of visibility to regulatory authorities. Choose the wrong one and you may run into issues later, especially if your compliance program doesn’t meet the AML standards.

Clearspeed offers RRA technology to assist in finding the right candidate to lead your firm’s compliance. Whether they are located domestically or abroad, they can be interviewed in any location and language, in under ten minutes. To use our technology in your search, contact us today.

Lead Image Source | Flickr user Kurtis Garbutt