Identity Resolution Daily

[Editor’s note: This post was originally published on August 9th, 2007. However, with so many financial services professionals Googling this post, we thought we’d make it easier on you and republish it again to the front page. And for the record, the Banking Secrecy Act STILL needs an overhaul.]

Even though the federal banking regulators updated the Bank Secrecy Act/Anti-Money Laundering requirements back in mid-July, there’s still lots of confusion to what is exactly meant by the mandate to Know Your Customer (KYC). Without clear guidelines for what is required, banks do what they can but if they end op getting fined, that’s just a cost of doing business.

As to the cost to an institution’s reputation, that’s a whole another matter entirely.

No one wants to have the head of the DEA saying something like this about their bank:

“Today an established and respected financial institution learned a valuable lesson about its legal responsibilities,” said Karen Tandy, head of the Drug Enforcement Administration.” — Reuters

And here’s a headline that Ken Chenault, American Express’ Chairman and CEO, didn’t want to wake up to today:

American Express to Pay $65M Money-Laundering Fine — CFO.com

Boy, this one’s gotta hurt:

Amex fined for money-laundering lapse — MSNBC

Headlines like this from 1998 were much more fun:

Ken Chenault: The Rise of a Star — Business Week

Back in July, American Express reported a 12% up-tick in second quarter net income. However, today at press time, while the headlines continue to appear, the stock for NYSE:AXP had fallen by 3.51 percent. The next shareholder meeting should be a lot of fun.

Here’s what the fuss is about. According the CFO story above, the DoJ, the Federal Reserve Board, and the Financial Crimes Enforcement Network (FinCEN) said about American Express Bank International (AEBI):

“AEBI failed to implement adequate internal controls, conduct adequate independent testing, and designate compliance personnel to ensure compliance with the BSA. The law requires banks to establish internal policies, employee training, and independent tests to protect themselves against money-laundering activities.

“DoJ investigators believes some of AEBI accounts were used to launder more than $55 million of drug proceeds through unregulated transferals of U.S. currency and South American currency. ‘AEBI operated in certain high-risk jurisdictions and business lines without commensurate systems and controls to detect and report money-laundering and other suspicious activity in a timely manner, as well as manage the risks of money laundering, including the potential for illicit drug trafficking-based Black Market Peso Exchange transactions,’ according to the FinCEN press release.”

In a previous post regarding the recent federal update to the BSA/AML, we pondered, “What is the legal, enforceable definition of a bank’s responsibility to ‘form a reasonable belief that it knows the true identity of its customers?’” American Express may have thought they had a reasonable belief of who their clients were in those “certain high-risk jurisdictions,” but the feds obviously felt otherwise.

In Feds Update BSA/AML Compliance Regs: Still No One Know What KYC Means, we wrote:

“It’s really scary that because of the ambiguity surrounding BSA/AML compliance, bankers are forced to play defense against their own government, instead of being on offense against money-launders, drug traffickers and terrorists.

“To Reps. Frank, Bachus and Lynchsay we say again what we said last week before this inter-agency statement came out: Congress needs to revisit AML legislation because no one really knows what Know Your Customer really means.”

If only they weren’t out for their August recess.

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[Daily Post from Infoglide Software] ACAMS’ International Money Laundering Conference

“The Association of Certified Anti-Money Laundering Specialists (ACAMS) is gearing up for the 6th Annual International Money Laundering Conference, September 24-26th in Las Vegas, NV.”

From earlier in the week:

CNW Group: Record Numbers Gather in Toronto to Examine the Extent and Impact of Retail Organized Crime in Canada and North America

“‘Retail organized crime affects retailers of every type, every size, and in every part of North America to a tune of $40 billion annually, and in turn, adversely affects the economy and consumers. Therefore, loss prevention is a critical priority for all retailers, large and small,’ says Diane J. Brisebois, President and CEO of Retail Council of Canada.”

BTNonline: One-on-One With TSA’s Kip Hawley: TSA Seeks Support, Ideas For Security Advances

“Secretary Chertoff has been definitive in saying that he wants to start implementation before he leaves office at the end of 2008. That is the measurement that I am accountable for and it’s a question of funding now that the rule is out. The commentary that is out there generally is that it is a pretty solid rule. A lot of the concerns that people had—were we going to use commercial data, were we going to make it more expansive than just watchlist checking—are not there anymore because when you read the rule, it is very clear on those major issues that this is a very focused program for watchlist matching. I am anticipating that this is not going to be as controversial as a lot of people had been expecting. It is being considered in the Congress right now. If it is fully funded, I expect we can met the secretary’s deadline. If not, it won’t be.”

Retail Solutions Online: Loss Prevention: SIRAS.Com Launches Information Database To Fight Crime

“SIRAS.com, the pioneer in Point-Of-Sale Electronic Product Registration used by leading manufacturers and retailers, has announced the nationwide launch of SIRAS P.I., a groundbreaking initiative to aid law enforcement officials in determining whether products they recover are, in fact, stolen, and if so, from where. Piloted by the Mesa, Arizona Police Department, SIRAS’s P.I. (Product Information) Database has already proven to be effective in helping law enforcement officials identify stolen items, report suspicious items, and apprehend and convict thieves. The database will be available, free of charge, to police and law enforcement agencies nationwide.”

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The Association of Certified Anti-Money Laundering Specialists (ACAMS) is gearing up for the 6th Annual International Money Laundering Conference, September 24-26th in Las Vegas, NV.

According to an announcement yesterday from ACAMS, the conference will open with a “rare, inside look at a regulatory exam” with a walk-though by
Lisa Arquette (FDIC), John H. Atkinson (Federal Reserve Bank), and Kimberly Hebb (OCC).

Our own intrepid director of financial services, Glenn Hopkins will also be attending the conference. If you’d like to learn a bit more about identity resolution, send Glenn an email to set up an appointment.

If you haven’t already registered, there’s still time.

If you’re attending, here’s a sampling of the 29 sessions available:

To Bank or Not to Bank: Are PEPs Worth the Risk? - Tuesday, September 25, 10:45AM - 12:00PM

[Seminar] “Today’s AML officer is no stranger to the problem of politically exposed persons. These individuals usually hold senior positions that can fall into a range of categories – political figures, high-ranking military officials, senior executives of state-owned companies. PEPs also extend to the family members and close business associates of these individuals. With so many classifications, distinguishing a PEP can be an arduous process. Not all PEPs are corrupt, but banking a dangerous one can be a disaster for your institution and open you up to many liabilities. Using an analysis of case studies, experts will guide you through the steps to determine if your institution has a PEP and the decision making process that occurs afterwards. Learn how taking the proper enhanced due diligence measures can mitigate the risks and help protect your institution without negatively impacting your organization’s proceeds.”

Between a Rock and a Hard Place: Meeting Regulatory Demands of U.S. Correspondent Banks - Monday, September 24, 1:30PM - 2:45PM

[Workshop] “International organizations that have US correspondent accounts must comply with the far-reaching USA Patriot Act, as well as their own regulations. This often puts them in a precarious position, including when it comes protecting the privacy of their customers’ data, that could explode into a negative regulatory action. How are foreign institutions handling the enhanced due diligence requirements that this law mandates to their U.S. correspondents? This workshop will examine real life scenarios that show how non-U.S. institutions manage the demands from U.S. correspondents. By dissecting these case studies, learn the appropriate steps you need to take when prioritizing the requests of your correspondent. Gain insight on how to make the right decisions that combine business logic and keep you in compliance with regulatory requirements.”

Scams and Schemes: Matching Wits with Innovative Criminals - Tuesday, September 25, 1:30PM - 2:45PM

[Workshop] “Say what you will about money launderers, but one thing is for sure: they never stop trying to find new ways to tip toe around money laundering controls and squeak past law enforcement. Their scams can be a new spin on an old trick or can exploit the latest advances in technology as a way to move their dirty money. Either way, as an AML professional, part of your responsibility is to stay current with new money laundering schemes to guarantee that you are doing everything possible to keep these criminals at bay. In this workshop, take a hands-on look at recent case studies that involved new money laundering methods and techniques. Dissect these innovative ploys and by working together in groups, find new solutions to get the upper hand and help protect your institution against financial crime.”

For more, click here.

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[Daily Post from Infoglide Software] Fear Factors into BSA/AML Compliance

“Current banking regulations have ambiguous guidelines and it’s the fear of large fines and bad publicity that creates an unquenchable thirst for information. And because they’re wary of asking the feds for clarification — which only brings unwanted scrutiny — compliance officers turn to the Web and each other for answers.”

Association of Certified Anti-Money Laundering Specialists (ACAMS) to Open Annual Conference With a Rare, Inside Look at a Regulatory Exam From Top Government Officials

“The Association of Certified Anti-Money Laundering Specialists (ACAMS) the premier membership organization for AML professionals worldwide, will open their annual international conference next month with inside advice into the most daunting and stressful challenge for private sector compliance professionals — a visit and review by a federal regulator.”

CNW Group: Record Numbers Gather in Toronto to Examine the Extent and Impact of Retail Organized Crime in Canada and North America

“‘Retail organized crime affects retailers of every type, every size, and in every part of North America to a tune of $40 billion annually, and in turn, adversely affects the economy and consumers. Therefore, loss prevention is a critical priority for all retailers, large and small,’ says Diane J. Brisebois, President and CEO of Retail Council of Canada.”

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Here at Identity Resolution Daily we cover a variety of topics that are of interest to readers in the federal government, retail, insurance and financial services sectors. Our readers come here because the need to resolve identities is critical for retail loss prevention, insurance fraud prevention and risk management. And when it comes to homeland security, identity resolution is a matter of life and death.

Of all the topics covered here, however, nothing brings in more readers than a post on Banking Security Act/Anti-Money Laundering (BSA/AML) compliance. We suspect a number of reasons for the popular appeal of BSA/AML news and analysis. The biggest driver, though, is probably fear. Current banking regulations have ambiguous guidelines and it’s the fear of large fines and bad publicity that creates an unquenchable thirst for information. And because they’re wary of asking the feds for clarification — which only brings unwanted scrutiny — compliance officers turn to the Web and each other for answers.

If you ask Charlie Intriago, the publisher of the Money Laundering Alert, why his subscriber base keeps ticking up at a healthy rate, would he conclude the same thing?

Interestingly, our most popular post by a wide, wide margin is Why Banking Secrecy Act Compliance Officers Drink Maalox, by our financial services director, Glenn Hopkins. Glenn must have his finger on the pulse of the banking regulatory community — either that, or compliance officers really like funny headlines.

Here’s an excerpt from his post:

“If you have a Latin, Muslim or Arabic name and your name is similar to a terrorist, it can cause you inconvenience, perhaps even financial hardship. But the next time you’re having trouble getting through airport security, it might amuse you to know that your name is causing fits among Bank Secrecy Act (BSA) compliance officers all over the world.”

Our second most popular post, American Express Fined $65 Million — Bank Secrecy Act/Anti-Money Laundering STILL Needs Work, pointed out that “no one wants to have the head of the DEA saying something like this about their bank: ‘Today an established and respected financial institution learned a valuable lesson about its legal responsibilities,’ said Karen Tandy, head of the Drug Enforcement Administration.’”

Naturally, this post pulled in a lot of people from American Express. Surprisingly, we saw a lot of employees from competing banks, as well. Must have been some sort of “there but for the grace of God go I”-sort-of-thing.

The Anti-Money Laundering Iconoclast, the third most popular post, was about Mr. Anti-Money Laundering, Charlie Intriago. We said such nice things about him, that we’re sure all that traffic just came from his friends and family.

If you want be sure to catch every post, please sign up for our newsletter up in the top right hand corner. And thanks for reading our blog!

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[Daily Post from Infoglide Software] Something Nice on 9/11

“But let’s not forget to mourn the 3000 lives lost. And the best way to memorialize those who are no longer with us, is to do something nice for those still here, according to the Christian Science Monitor story, In 9/11 remembrance, a turning to good deeds.”

BTNonline: One-on-One With TSA’s Kip Hawley: TSA Seeks Support, Ideas For Security Advances

“Secretary Chertoff has been definitive in saying that he wants to start implementation before he leaves office at the end of 2008. That is the measurement that I am accountable for and it’s a question of funding now that the rule is out. The commentary that is out there generally is that it is a pretty solid rule. A lot of the concerns that people had—were we going to use commercial data, were we going to make it more expansive than just watchlist checking—are not there anymore because when you read the rule, it is very clear on those major issues that this is a very focused program for watchlist matching. I am anticipating that this is not going to be as controversial as a lot of people had been expecting. It is being considered in the Congress right now. If it is fully funded, I expect we can met the secretary’s deadline. If not, it won’t be.”

Washington Post: U.S. More Prepared but Faces Ongoing Threat

“In their testimony, the four officials said that the government is better at collecting and analyzing intelligence, and that federal agencies have broken down many of the barriers that hampered communication.”

USA Today: Chertoff: Security requires sacrifice

“Chertoff says he is frustrated by the growing number of ‘people who say, ‘Yes, protect us, but not if it inconveniences me.’ […] he considers it one of his ‘biggest obligations’ in his remaining 16 months in office to eliminate the ‘not-in-my-backyard attitude’ when it comes to relatively small costs and inconveniences.”

AP: Traveler Assessments Little Altered

“Beyond that, Teufel said, the [Automated Targeting System] tries ‘to identify other high risk travelers previously unknown to law enforcement.’ This is done by comparing the passenger’s data with a secret list of ‘rules’ — theories conceived by department analysts based on intelligence reports and past terrorist attacks — describing behavior that might indicate someone is a terrorist or other type of criminal.

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Six years ago today, 9/11, the unthinkable happened. Now there’s a new Zogby poll out that finds that 61 percent of Americans think about the tragic events of that day at least once a week and 16 percent think about it every day. The poll also discovered that “eighty-one percent of those surveyed said they see the attacks as the most significant historical even of their lifetimes.”

Since 9/11 we’ve been forced to rethink many things — freedom, security, privacy, war. And today, thanks to worldwide media coverage, everyone will think back to where they were when they heard the news. There will be lots of stories — too many stories — about what we’ve done wrong since that day, and what we’ve done right.

But let’s not forget to mourn the 3000 lives lost. And the best way to memorialize those who are no longer with us, is to do something nice for those still here, according to the Christian Science Monitor story, In 9/11 remembrance, a turning to good deeds. Alexandra Marks reports:

“The heroic acts of all those killed trying to save others that September morning has spawned a growing grass-roots movement. The goal is to ensure that future generations remember not just the horror of the attacks, but also the extraordinary outpouring of humanity during the days, weeks, and months that followed.

‘It was the worst possible day imaginable, and in some ways, a remarkable day, too, in the way in which people responded,’ says David Paine, cofounder of myGoodDeed.org. ‘We need to rekindle the way we came together in the spirit of 9/11: It would be almost as much a tragedy to lose that lesson.’

“Sept. 11 has inspired dozens of philanthropic efforts – from groups dedicated to building memorials to foundations designed to improve education in the Middle East. But myGoodDeed has a more universal goal: to turn 9/11 into a day dedicated to doing good – from small, simple things like Lisa Scheive’s pledge to help stranded turtles cross the road in Pompano Beach, Fla., to lifesaving efforts, such as John Feal’s decision in New York to donate one of his kidneys to help a seriously ill 9/11 worker.”

myGoodDeed was founded as way to memorialize Glenn Winuk, a volunteer fireman who lost his life selflessly helping others when he ran into the smoke cloud that poured from the Twin Towers.

Please read the whole story to hear about the heroic Mr. Winuk and the thousands who are pledging to do something nice today to honor him and all the others who died that day. Then please go sign up at myGoodDeed and go do something nice for someone else today.

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[Daily Post from Infoglide Software] The Young and the Restless: Financial Services Compliance Officers

“Here’s Institutional Investor’s 20 Rising Stars of Compliance and they’re young and they’re restless. They’re young because the average age of these regulatory compliance pros is 35. They’re restless because they specialize in regulatory compliance for anti-money laundering, financial crime, international regulation, risk management, IT and auditing.”

Fraud, Phishing and Financial Misdeeds: SIRAS PI - tracking theft to the source

“Along with the increased availability of fraudulent forms of payment, obtaining counterfeit identification documents has become fairly easy, and the identity used on them normally belongs to someone else. This has made it easy for a lot of retail criminals to operate as someone else.”

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Here’s Institutional Investor’s 20 Rising Stars of Compliance and they’re young and they’re restless. They’re young because the average age of these regulatory compliance pros is 35. They’re restless because they specialize in regulatory compliance for anti-money laundering, financial crime, international regulation, risk management, IT and auditing.

Bank Secrecy Act compliance is a tough job, compounded by ambiguous regulations and the fear that a slip-up can aid drug traffickers and terrorists — not to mention cause bad publicity for your financial institution.

Regarding some of the issues facing compliance officers, Institutional Investor pulled together some great quotes from its rising stars:

“In compliance we struggle with the sometimes competing visions of those we serve, such as our business clients, compliance and legal department colleagues and external regulators.” — Paula Bosco, Lehman Brothers

“Clients hold all of their fund managers to the same high standards and expectations. But for small and newly-established groups, implementing best practices can create particular challenges.” — Alexandra Gardiner, EMAlternatives

“It is incumbent on a compliance officer to continuously re-examine the risks associated with our industry and those specific to his firm in order to help prevent violations of laws, rules and regulations and to protect the reputation of his firm and the integrity of our industry.” — Alan J. Herzog, A.G. Edwards & Sons

If this post draws any of you 20 Rising Stars of Compliance to Identity Resolution Daily, we’d love to have you contribute a guest post to our Knowledge Center.

RELATED ARTICLES:

Why Banking Secrecy Act Compliance Officers Drink Maalox

Reverse Money Laundering: When Clean Money Goes Dirty

The Banking Industry Needs Identity Resolution

Complexity of Identity Resolution and Anti-Money Laundering

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[Daily Post from Infoglide Software] On Doing the Right Thing, Even When Difficult

“Every once in awhile a situation comes up that points up the significance of our Values. This one in particular — “We will do the right thing, even though it may be difficult.” — is a value that means a lot to most of us. So with that opening, I want to share a situation with you….”

Retail Solutions Online: Loss Prevention: SIRAS.Com Launches Information Database To Fight Crime

“SIRAS.com, the pioneer in Point-Of-Sale Electronic Product Registration used by leading manufacturers and retailers, has announced the nationwide launch of SIRAS P.I., a groundbreaking initiative to aid law enforcement officials in determining whether products they recover are, in fact, stolen, and if so, from where. Piloted by the Mesa, Arizona Police Department, SIRAS’s P.I. (Product Information) Database has already proven to be effective in helping law enforcement officials identify stolen items, report suspicious items, and apprehend and convict thieves. The database will be available, free of charge, to police and law enforcement agencies nationwide.”

Financial Week: It’s all been adding up for forensic accountants

“With the passage of Sarbanes-Oxley, more active enforcement of laws like the Foreign Corrupt Practices Act and anti-money-laundering rules, and a generally heightened level of scrutiny of corporate financial reporting, forensic accountants may be the most highly sought after professionals in the U.S. economy.”

Institutional Investor: 20 Rising Stars of Compliance

“Institutional Investor News’ 2nd annual 20 Rising Stars of Compliance presents up-and-coming professionals from various fields of regulatory compliance whose skills, dedication, and industry and academic participation are likely to have an impact on securities compliance.”

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