The Spring 2016 issue of Advantage: Risk & Regulation examines perspectives on recent global regulations that impact financial institutions and other organizations and provides approaches to maximize the effectiveness of their compliance programs.

On February 4, 2016, the Basel Committee on Banking Supervision (“BCBS”) issued a revised version of its General guide to account opening (“Revised Guide”). The Revised Guide replaces BCBS’s General Guide to Account Opening and Customer Identification, issued in February 2003, and emphasizes a risk-based approach to an institution’s account opening process. In the leading article, BCBS Revised General Guide to Account Opening, Guidehouse professionals discuss the new regulatory requirements and explain how banks can protect against money laundering and threats of terrorism financing by applying a risk-based approach to their account opening processes.

In 2012, the United States enacted the Jumpstart Our Business Act (the “JOBS Act”) with the goal of stimulating U.S. job creation and economic growth. To achieve this, the JOBS Act includes provisions to improve cost-effectiveness and speed of accessing capital for companies of all sizes through crowdfunding and the Internet-based platforms that facilitate the raising of capital for business ideas. In late 2015, the Securities and Exchange Commission adopted the JOBS Act’s final rules on Title III on crowdfunding. In the article Jobs Act Title III: Crowdfunding Rule Minimizing AML Risk When Raising Capital through the Internet, our experts highlight important provisions companies looking to utilize crowdfunding, potential investors, and crowdfunding platform providers should consider.

We hope you enjoy this issue of Advantage: Risk & Regulation, the quarterly newsletter developed by the professionals in Guidehouse’s Global Investigations & Compliance (GIC) practice to bring you insightful information and perspectives on timely and relevant industry issues that can impact your business. 

Please contact us if you would like to begin a dialogue on the topics covered in the newsletter or other risk and compliance issues.

Protecting Against Money Laundering And Counter Financing Threats With A Risk-Based Approach 

In this article, Guidehouse professionals discuss the new regulatory requirements and explain how banks can protect against money laundering and threats of terrorism financing by applying a risk-based approach to their account opening processes.

On February 4, 2016, the Basel Committee on Banking Supervision (“BCBS”) issued a revised version of its General guide to account opening (“Revised Guide”). The Revised Guide replaces BCBS’s General Guide to Account Opening and Customer Identification, issued in February 2003, and emphasizes a risk-based approach to an institution’s account opening process. In BCBS Revised General Guide to Account Opening, Guidehouse professionals discuss the new regulatory requirements and explain how banks can protect against money laundering and threats of terrorism financing by applying a risk-based approach to their account opening processes

Minimizing AML Risk When Raising Capital

In the article Jobs Act Title III: Crowdfunding Rule Minimizing AML Risk When Raising Capital through the Internet, our experts highlight important provisions companies looking to utilize crowdfunding, potential investors, and crowdfunding platform providers should consider.

In 2012, the United States enacted the Jumpstart Our Business Act (the “JOBS Act”) with the goal of stimulating U.S. job creation and economic growth. To achieve this, the JOBS Act includes provisions to improve cost-effectiveness and speed of accessing capital for companies of all sizes through crowdfunding and the Internet-based platforms that facilitate the raising of capital for business ideas. In late 2015, the Securities and Exchange Commission adopted the JOBS Act’s final rules on Title III on crowdfunding. In the article Jobs Act Title III: Crowdfunding Rule Minimizing AML Risk When Raising Capital through the Internet, our experts highlight important provisions companies looking to utilize crowdfunding, potential investors, and crowdfunding platform providers should consider.

On May 11, 2016, the Financial Crimes Enforcement Network (“FinCEN”) released the long awaited Customer Due Diligence (‘CDD”) Requirements for Financial Institutions Final Rule. This ruling formally requires covered financial institutions to collect beneficial ownership information from customers at account opening and to ensure the information is accurate on an ongoing basis. In the leading article, FinCEN Customer Due Diligence Requirements for Financial Institutions: Final Rule, Guidehouse experts discuss the key elements of the Final Rule, the reasoning behind imposing a CDD rule and what it means for financial services firms.

What You Can do Right Now

• Compliance Officers should socialize the new rule with senior compliance and business management, and include those responsible for technology planning and budgeting. Consider providing an update to sales or similar staff which may be impacted and answering client questions.
• A gap analysis should be prepared to evaluate the financial institution’s current program against the proposed rule. 
• Based on the gap analysis, prepare a formal action plan for implementation of the changes that will be necessary, and identify those changes which require the most lead time. Determine which governance forum or committee in your organization should be responsible for overseeing and sponsoring the implementation and determine how and when updates should occur. 
• Evaluate changes in technology that might be required at both on-boarding and transaction monitoring. Create a timeline to ensure critical path actions are identified and scoped early. 
• Identify which high risk customers for whom you may want to obtain beneficial ownership information even in cases where it is not technically required by the rule. 
• Identify any sources of customer information which may be stored in other parts of the organization and can be leveraged to create a customer risk profile. 

In anticipation of the 2016 Anti-Corruption Summit in London, the Home Secretary of the United Kingdom announced the most significant changes to the region’s anti-money laundering and counter-terrorist finance regime in more than a decade. The plan looks to protect the United Kingdom’s financial economy and create a more hostile environment for those seeking to hide or use the proceeds of criminal or corrupt activities by implementing three key elements. In the article UK Creates Largest Money Laundering Reforms in over a Decade, our experts discuss the priorities of the action plan and how regulators will implement it.

• Financial institutions and other businesses in the United Kingdom will be facing a variety of additional regulatory requirements. 
• Law enforcement will apply new tools in the fight against money laundering and terrorist financing.

Banks may have to ensure they have the proper protocols in place to appropriately report on sources of revenue and income. 

Initial steps may include:

• Conducting an assessment of your Know Your Customer (KYC) policies and procedures. 
• Communicating the changes to senior leadership, affected business units, and pertinent third-parties.