Report of the 17th Annual FIBA AML Compliance Conference

 

One of the main international banking meetings is the Annual Anti-Money Laundering Compliance Conference, organized by the Florida International Bankers Association (FIBA). This year, the event has drawn the attention of more than 1,400 attendees representing over 50 countries around the world and has introduced more than 100 sector leaders who have discussed issues related to money laundering and terrorism financing.

The 17th annual conference was held on March 6, 7 and 8 at the InterContinental Miami hotel. Dominion Digital took advantage of the crowded event and the status of the persons concerned to present its new compliance suite: WindRose Compliance Suite.

Windrose Compliance Suite-Dominion Digital Stand

 

The discussions included the following issues: developments in the Anti-Money Laundering (AML) landscape, FATCA and CRS, the current state of De-Risking, correspondent banking, discussions with US regulators, technology against money laundering as Blockchain and cybersecurity.

In addition, the meeting this year contained sessions focused on the challenges that financial institutions must face. Money laundering is becoming more sophisticated and complex (virtual currencies, wallet cards…) and financial institutions have the duty and the requirement of regulators to have sophisticated computer systems to detect and report suspicious transactions. During the three days that Dominion Digital attended, the specific objectives were:

  1. Share ideas with different private and public sector leaders.
  2. Obtain the relevant knowledge and information to return to the institutions and strengthen the existing programs.
  3. Discuss key ideas about regulatory expectations and best practices by ensuring that financial institutions have the relevant information to operate safely in the current BSA / AML / OFAC compliance environment.

In the following lines, the most relevant subjects are exposed.

Gaps between US Regulations and other Regions

The opening session focused on the progress made in Latin American regulations to close the remaining gaps with respect to the US and served to record the work being done to ensure correspondent banking relations (United States – Latin America).

From the US Department of the Treasury, it was pointed out that the existing gaps arise not so much between the regulations of both regions, but between what regulation says in Latin America and how it is implemented. To this premise was added Rudy Araujo, representing the Association of Banking Supervisors of the Americas (ASBA). According to him, no big gaps between laws / standards are detected but in terms of the scope of their application. He put as an example the problem with KYC (Know Your Customer), it is necessary and so is legislated but in some countries its scope is rather limited since not everyone has a tax return or an identification document. In the latter case, the identification document, is one of the few that contains, among other elements, name, photograph, signature, address of the potential or current customer, but it is not within reach of all. Therefore, he pointed out the importance of adapting the regulations according to each case.

Another problem is the excessive regulation in some countries. Mariano Federici, the Financial Information Unit Director of Argentina, an agency charged of investigating and prosecuting alleged perpetrators of money laundering and former adviser of the IMF, highlighted the inefficiency of the regulatory system, which in many cases hinders investment and access to financial services. This results in the proliferation of “informal” channels by those who can not access to such banking services. These alternative channels are used to give a legal view of money from illicit activities. That is why a comprehensive reform of the regulatory framework is proposed.

Finally, the gradual maturity reached by the private system was emphasized, even though the point was made that the need for a minimum agreement between public and private institutions.

What’s new in the Anti-Money Laundering landscape?

Senior compliance executives, risk managers from the financial industry and regulators discussed current issues and emerging trends about Anti-Money Laundering and Terrorism Financing.

De-risking, eliminating risk by cutting off business relationships with clients in countries or sectors considered to be high risk, focused most interventions. It has been reflected that it has become a very frequent practice in banks that operate in the United States and some of Europe. The well-known strategy has emerged as a response to pressures by regulators on the banking sector.

In addition, it was pointed that some institutions are reacting disproportionately by choosing to limit or cancel certain lines of business and customers, due to stricter regulation in line with international standards, as well as the policies of foreign correspondent banks with which financial institutions operate local, which should not be considered as the solution to all  the problems related to the right management of AML risks.

FATF notes that De-risking is mostly associated with the risk of money laundering and terrorism financing, this is a topic that goes well beyond that risk and may be associated with other factors. This is confirmed by the regulatory agencies, who pointed out that the aspects that generates De-risking are those of AML / TF and Know Your Customer (KYC). They also indicated that there are other important elements to consider, such as technological aspects, confirming their support to artificial intelligence and innovation to improve information channels.

There is consensus that De-risking process in developed financial markets has a direct impact on emerging markets due to the decisions of the parent banks of the foreign banks operating in the region as well as the foreign institutions that stop providing services of correspondent among others. LATAM expressed the difficulties that some entities are finding to have correspondent banks in the United States, noting the importance of this for international trade. Some American financial institutions have left the banking correspondence which makes it difficult for some jurisdictions to access to the US financial system.

Due to this, and because De-risking affects the provision of financial services and competitors, the possibility was raised that the supervisor could establish an adequate balance between the regulatory requirements and the viability of the financial market of each region, as well as Improved communications and information exchange among regulators in the different regions, even though many, particularly Americans, are the driving force behind De-risking.

Are tax amnesty programs a compliance risk?

This panel discussed the implications of international amnesties and the search for best practice guidelines for the treatment of international amnesty laws and programs from a regulatory compliance perspective, including reporting requirements.

The president of the Financial Information Unit (FIU) of Argentina, Mariano Federici, pointed that the Financial Action Task Force (FATF) did not object to the money laundering law, which had been in force in Argentina since last August. The intergovernmental body that designs and recommends the practices against Anti-Money Laundering around the world supported the initiative with which the Government plays the recomposition of the local capital market and its financing. The FIU welcomed the decision because it is the first time it supports a tax amnesty without objections or amendments.

The “voluntary compliance plan in tax “, as Federici has come to call it, complies the basic principles of international best practices for Anti-Money Laundering and Terrorism Financing in this kind of program.

The FATF endorsement corroborated the good relations between Argentine regulators and the intergovernmental body, which calificated the country on the “gray list” of countries that had not collaborated, until last year.

From Argentina it is understood that, in the past, some savers opted for more stable governments and jurisdictions that protected their savings from political corruption. Argentinas government understands the past but believes that to build a future savers must clean their money. Therefore, we want to encourage to take advantage of the present amnesty to those people who have generated their property lawfully and who only maintain an irregular fiscal situation. In this sense, they hope that the banks will not obstruct the implementation of this program, driving away people who want to be honest, asking for information or documents that the FIU or any other institution requires.

On the contrary, he pointed that, as a supervisory body, focus is to ensure that criminal, narcotrafficking or corrupt organizations cannot take part in this program and take advantage to introduce goods obtained from serious crimes into the system. Therefore, it is necessary to increase measures and involve the Financial Intelligence Units to ensure that the established AML systems are not affected.

Interview with Rudolph Giuliani on “Impact of the US Presidential Election on the Financial Services Regulatory Program”

Within the conference framework that took place on the Impact of the US Presidential Election on the Financial Services Regulatory Program, Rudolph Giuliani, former NYC Mayor, a member of Donald Trump’s transition team and named as the link between the private and public sector on cyber security issues, said the current president is unlikely to alleviate US regulations on Anti-Money Laundering.

In addition, he said that the administration is also likely to issue cyber security regulations. If there is one area where there is not going to be too much of rollback, if any, is in the area of terrorism, since the new president of the United States is aware that part of defeating terrorism is following the money.

“One of the ways you defeat them is to take the money away from them and one of the ways you find them is through the money.” said Giuliani. In the interview he pointed that he considered that the intelligence of financial crimes that banks have provided has been very useful against this terrorism.

Despite the fact that this is an aggressively anti-regulatory administration, it has ordered agencies to repeal two for every new one adopted, it seems that the rules on Anti-Money Laundering and the Banking Secrecy Act are except.

Giuliani, who has provided commercial consulting services on cyber security legal matters, commented that new federal standards could emerge in this area, explaining to companies what they should do to avoid security breaches and providing a safe environment for those who follow the rules. Financial institutions should be more prudent and hire services to evaluate their vulnerabilities on the one hand and test the defenses trying to break them on the other.

Finally, Rudy Giuliani estimated that cyber security defense measures for banks could run from hundreds of thousands of dollars for smaller institutions to multiple millions of dollars for the largest institutions, concluding that it is important for companies to be prepared to demonstrate the reasonable steps that have taken to prevent infringements because those whose weaknesses allow hackers to obtain the identities of customers, can face demands and end up loosing much more money than they had invested to defend adequately.