Banking institutions have begun to distribute questionnaires to all their Non-Bank Financial Institutions (NBFI) customers regarding their Anti Money Laundering (AML) programs and all those NBFI’s that do not have a properly complied with AML program will be kindly asked to leave the bank for all eternity, dum dum dummmmm. Now smaller institutions like insurance brokers and mortgage brokers have often been lax in establishing a proper program because it was generally thought that Money Laundering concerns would only follow larger companies or hubs of concern, namely casinos. Smaller companies figured they would “take care” of compliance when and if they were audited in what is referred to as a “Title 31” audit, in which the IRS is tasked in reviewing those needing to comply with the Bank Secrecy Act (BSA). No longer can you hide, now the Banking institutions themselves have been tasked with making sure that they identify businesses that require compliance and cover their own “tuchus” by throwing those that cannot confirm their compliance out of their account coffers. So does this apply to you?
Are you a:
- Casino or a card club (most of these have been knee deep in compliance for years).
- Securities and commodities firms (e.g., brokers/dealers, investment advisers, mutual funds, hedge funds, or commodity traders).
- Money services businesses (MSB). (businesses offering check cashing, money orders, travelers checks, money transfers, foreign currency exchange, and pre-paid access).
- Insurance companies and Brokers.
- Loan or finance companies. (Hard Money Lenders and Mortgage Brokers)
- Operators of credit card systems.
- Other financial institutions (e.g., dealers in precious metals, stones, or jewels; pawnbrokers).
If you said yes to any of the above then YOU ARE OUR LUCKY WINNER!!! “Johnny tell em what they’ve won.”
A stylish, sexy and shiny new AML Program!!! Complete with Terrorist financing components and EVEN Mortgage fraud! Plans should be expansive enough to include provisions to Know your Customer (KYC). AND THE CROWD GOES WILD, AHHHHHHHHHHHHHHHHHHHHHHHHHHH.
The Basic Requirements:
The AML Compliance Four Pillars.
- Development of written internal policies, procedures and controls and comprehensive Risk Assessment.
- Designation of Compliance Officer.
- Ongoing and periodic training of employees.
- Annual, periodic independent compliance testing of AML Program by a third party.
Don’t freak out though, because a competent AML compliance attorney can help get you up to speed, program armed and compliant (ahem ahem I wonder where you could find one of those…).
One Note: Even if your bank has not yet sent you a letter this is no reason to sit back and relax. A letter with a short window to be compliant can still arrive potentially damaging your business in a big way. Further if the Banks are starting to go on the defensive for these programs it means an uptick of IRS enforced AML audits are on the way, which means when you are not compliant for a significant amount of time and they find you it will come along with major fines, legal issues and possibly the loss of whatever license your business may carry. Winter isn’t coming, it’s already here.
As always I am available for coffee to discuss 🙂 .
Benjamin Goldburd is an Associate at Goldburd McCone LLP a tax and corporate focused law firm in New York City and Long Island.