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The recent guidance (warning, really) from the FDIC1 on the need for financial institutions to perform due diligence when selecting anti-money laundering (AML) software puts the proof of compliance burden squarely on the financial institution. It also points to the need for an enterprise solutions architecture, one that builds on existing structures-how things really are-rather than on pushing through a vendor package. While there is no doubt that commercial off-the-shelf (COTS) products play an integral part in AML compliance, there is also no doubt that AML software depends on the quality and uniformity of data supplied by the financial institution. The systems, data, processes and organizational structure of the enterprise form the infrastructure of compliance, and these must be understood and documented to ensure that the COTS "solutions" are just that. If, for example, a bank wanted to institute an automated customer risk scoring system, there would be many questions that needed answers before software could be selected and installed...
A lonely woman falls for a silver-haired gentleman-the face of a criminal enterprise in Africa-in one of the most common romance scams known to law enforcement. She loses her house and her savings. She is devastated both financially and emotionally, taken in by shysters who understand the vulnerabilities of the lonely. And in this true case, the lonely woman is also a victim of the American banking system.
In one critical anti-money laundering (AML) review of a mid-tier bank, examiners admitted to having a hard time understanding how the transaction monitoring system worked.
A financial institution can have a comprehensive anti-money laundering program, a staff of experts, and a million-dollar (or more) specialized computer system in place and yet still miss potential problem customers because they failed to collect or use important data. In the end, it all comes down to data-discrete pieces of information that need to be collected, analyzed and presented in meaningful ways-to make a successful anti-money laundering program. No matter what automated or procedural anti-money laundering programs you have in place, the success of the program depends on meaningful data.One of the first steps in creating an effective program, then, is to develop a data plan to understand what data must be captured, how to capture it, how to analyze it, how to report it and how to use it.
What started out as an apparently straight-forward Transaction Monitoring System Validation project took an interesting and cautionary turn at an international bank recently. The Project Team assembled for the task-as well as executive management at the Bank-expected that the Validation would discover some less-than-perfect data mapping from their core banking system to their Transaction Monitoring System. A completely new Compliance staff had reviewed the Bank's unfamiliar (to them) Transaction Monitoring System, and could see that something wasn't quite right. Wires were not appearing properly on reports, General Ledger account numbers were showing up instead of Customer Account Numbers, and there were unnecessary transaction codes, like Wire fees, clogging the system. It seemed like a simple, methodical task of documenting the current mapping and making appropriate changes.
Negative interest rates are a confusing topic and they may be heading to the U.S. this year. Many Americans ask what they mean and why this is all happening. Since 2014, leading European central banks have initiated 'negative interest' policies as an economic stimulus measure by means of large government-issued or sovereign bond activities. Negative rates begin where major buyers of low-risk government bonds agree to accept a return less than their original investment when the bonds mature. Since Government bond rates are the bellwether for corporate bond rates, these once-improbable 'negative interest' bonds soon become a major influence in major bank bond portfolios. The Federal Reserve and U.S. banks are now looking at them.
While financial market observers in the US remain focused on the timing and magnitude of the Fed raising target interest rates over the months ahead, European bond markets have begun to experience just the opposite - the never-before-seen phenomenon of actual negative bond market interest rates. Since the Global Crisis of 2008, which saw both the Fed and foreign central bankers seeking both to calm markets and to encourage growth by reducing rates to the 'zero bound,' interest rates for bellwether German bonds and across Europe in late 2014 crossed into negative territory, and for the first time in world history.
Many banks need to add new board members because some are reaching a mandatory retirement age or because others who agreed to stay through the financial crisis now want to rotate off the board. Banks need to keep in mind that they will be under close scrutiny by any prospective candidate who will be conducting due diligence on the bank at the same time the bank is conducting due diligence on the candidate. In order to ensure your bank can attract top candidates for board positions, consider the following before beginning the recruiting process:
In and during the period 2000 through approximately mid 2008, for many of the nation's "subprime" households to receive loans and for many major financial institutions to loan out available funds at high rates, create "new" mortgage products, sell these newly created products downstream to investors (both institutional and individual investors) at a significant profit, investments banks and commercial banks created an unusual national scenario – subprime mortgages that were packaged and sold into mortgage backed securities
Directors in community banks are usually picked for two reasons: their expertise and their ability to bring business into the bank. Upon taking their places at the board tables, however, directors immediately learn that while bringing business into their bank is a laudable goal, they also have to ensure that their bank operates in a safe and sound manner. Directors, thus, walk a fine line between these two goals.