As banks continue to make large expenditures on technology for anti-money laundering (AML) compliance, they would be well-advised to continue employing traditional due diligence and following long-standing and basic Know Your Customer procedures. In the long run, a strong balance of high-tech savvy and common sense diligence can deter and detect criminals who are continually developing new methods to launder and to steal money in wire transfers.
Some of the newest schemes carried out today are built around the fraudulent use of stolen identities and other account information in international wire transfers. Recent reports, for instance, have described efforts by individuals and groups to use stolen information to access funds electronically from banks and then to transfer the funds to institutions overseas. In these schemes, money is withdrawn before the fraud can be detected.
One tactic that is commonly used by fraudsters is a rush request. In this scenario, a bank employee is asked to rush a transfer and the result is often a lack of due diligence in the compliance area. In order to meet the expedited timeline, compliance staff may fail to complete a standard call-back procedure, where the client is called directly to ensure that he or she has actually requested the transfer.
Other commonly used fraud tactics involve complicit employees. In some cases, an employee, such as an account officer, may participate in and facilitate the fraud, which underscores the need for maintaining dual controls.
If a bank allows a fraudulent transfer, the funds in question can disappear into cyberspace before any kind of verification is even sent to the client and/or the corresponding receiving bank.
This example of fraud is a reminder to always perform a call-back and contact the customer for verification of a transaction that has been requested by a means other than in-person. It also provides a reminder of the overall importance of continually monitoring all anti-money laundering controls to make sure they are effective, up-to-date and in compliance with the Bank Secrecy Act (BSA), the USA Patriot Act and other laws and regulations on anti-money laundering (AML) and other financial crimes.
Many banks are still devoting considerable time and resources to issues of credit quality as a result of the deterioration of the real estate market. We constantly remind our clients that regulators are not reducing their scrutiny and they do not consider time and money spent on real estate issues as a justification for not maintaining appropriate BSA/AML compliance programs.
A poor compliance rating could require a bank to obtain additional resources to address regulatory requirements that result from regulatory actions. Such an outcome would force the institution to incur costs for these resources, as well as expenses associated with updating BSA/AML programs. Additionally, if a bank continues to be non-compliant, fees and/or fines may be assessed by regulators.
Ms. Ladron de Guevara is a certified public accountant at Miami-based Morrison, Brown, Argiz & Farra, LLC. She is a senior manager in the Audit Department, where she is part of the firm’s financial institutions and SEC practice. She can be reached at email@example.com.