In this article, I explore the reset opportunity for industry and government to come together in a concerted effort to prevent the access and abuse of the U.S. and international financial system by bad actors; promote transparency within the system; and ultimately enhance U.S. national security.
Back in February, the US Department of the Treasury published it’s 2018-2022 Strategic Plan. The 51-page publication laid out enhancing national security as one of its five goals. For financial crimes risk and compliance professionals, within the financial services industry, particular attention should be paid to pages 24-29 (a quick six page read). The Treasury clearly lays out three basic objectives (3.1-3.3), desired outcomes, and strategies that are easily discernible queues for industry to focus its efforts on deploying effective and efficient anti-money laundering (AML) programs.
Strategic Threat Disruption (Objective 3.1)
Let’s first look at the desired outcome of this objective: “identify, disrupt, and successfully isolate threats from the U.S. and global financial system; deny revenue sources to terrorist financiers, money launderers, weapons proliferators, drug kingpins, and human rights abusers; proactively implement U.S. policy toward regimes such as Iran, North Korea, Venezuela, and Russia, and terrorist organizations such as ISIS, Hizbollah, and al-Qa’ida”.
Here are some questions I would ask myself in my former role as a Chief AML Officer: (1) does my current AML policy statement align with this Treasury objective? (2) do I have a strategic plan in place that at least incorporates Treasury’s top-level goal and underlying objectives? (3) does my risk assessment, risk rating methodologies, transaction monitoring strategy, and due diligence programs precisely target the bad actors (individuals, organizations, and nation-states) that Treasury clearly calls out? (4) are my overall programmatic and operational frameworks designed to support Treasury’s desired outcome?
If you look at the illustration on page 25 of the publication – you will specifically see industry’s key and critical role in diagnosing risks to the financial system – regulatory reporting and record keeping are not compliance activities. The force multiplier mindset has never been more critical as the risks/threats continue to evolve and expand.
AML/CFT Framework (Objective 3.2)
The desired outcome of this objective is to “prevent terrorists and other illicit actors from using the U.S. and international financial systems through strengthened U.S. and global AML/CFT frameworks; enhanced transparency in the international financial system”.
Here are some thoughts around an AML Officer’s mindset: (1) frameworks at the national level, industry as a whole, and within your own enterprise should have common threads – (a) strategy and planning; (b) people and expertise; (c) streamlined processes; (d) advanced technologies; (e) real partnerships with real communication; and (f) no-nonsense oversight and accountability (2) if you have used the words – compliance, regulatory risk, burden, and obligation more than the words terrorists and illicit actors – in your documentation your framework is likely flawed (3) if you talk about regulators more often than bad actors – on the front lines to the board room – your framework is likely flawed (4) if you have spent the past 6-18 months consumed by the new CDD rule (understanding the requirements, designing policy, and implementing within your program) – you have likely missed the boat that set sail back in 2012.
Economic Strength and National Security (Objective 3.3)
The desired outcome of this objective is “peace through economic strength; maintain an open inward foreign investment posture while eliminating national security risks”.
The most significant component of this objective is the concern of foreign acquisitions of U.S. assets that pose unresolved national security concerns – the nexus – global financial services.
Less application of objective 3.3, but I thought I would note it in this article.
The Treasury publication is a great place to start and reference back to when designing, re-designing, implementing, and examining a real AML program (one that is focused on the real risk, the real threat). If you haven’t read and incorporated our national level strategy into your own program you are not really in the fight, get in the fight, and remember who the real bad guys are (rogue regimes, terrorist financiers, money launderers, WMD proliferators, and drug kingpins)!