How Effective is US Anti-Money Laundering Regulation?

Finance Monthly Magazine

Finance Monthly interviewed Alma Angotti, managing director and co-lead of Guidehouse's global investigations and compliance practice, to discuss the current anti-money laundering (AML) regulation in the U.S., its challenges, and gaps for improvement. 

Q. In your opinion, how robust is current anti-money laundering regulation? Is there anything that could be improved? 
Legislatively speaking, the current U.S. AML laws are robust.

One important gap in the AML laws is that Investment Advisers are not currently required to comply with the Bank Secrecy Act (BSA). Investment Advisers sometimes have implemented AML compliance programs as a matter of best practice, but they have no obligation to file Suspicious Activity Reports. Because there is no enforcement mechanism, it is unclear how effective their programs are at detecting money laundering, terrorist financing, and other financial crime. There is a rule proposal that has been pending for several years. I think this is a risk area for the U.S. and global financial systems.

Another area for potential improvement includes a legislative mandate for all companies registering in the U.S. to include beneficial ownership information as part of the registration process and better cooperation among secretaries of state to assist in the identification of potential shell companies and corporations. Requiring the identification and information on the ultimate beneficial owner of a company deters shell companies and corporations from misusing registration systems and entering the U.S. financial market. Understanding the beneficial owner of a customer account, or the ultimate beneficial owner of a financial transaction, are key elements for financial institutions to understand their customers and assess customer risk appropriately. Additionally, if the customer engages in suspicious behavior, or suspicious transactions, knowing the ultimate beneficial party is integral to any potential law enforcement investigation.

Q. Why is it so important to take an active stance on AML? What are the penalties associated with AML in the U.S.?
Terrorism and transnational organized crime take a terrible toll on societies. The horrific terrorist acts we have seen over the past 20 years cost money and were financed by someone. Our AML/CTF and Sanctions laws, rules, and regulations are in place to stop and deter terrorists from using our financial institutions to finance terrorism, and to stop criminals from laundering the proceeds of other abhorrent practices such as human, sex, or drug trafficking; financing weapons of mass destruction; and nuclear proliferation. Financial institutions play a critical role in protecting the U.S. and global financial systems from these bad actors. We all must be vigilant in this fight.

Q. What changes would you like to see implemented in AML legislation, both nationally and internationally?
As I stated above, I believe it is past time for U.S. regulatory agencies such as the Department of Treasury and FinCEN to assert regulatory authority and oversight over Investment Advisers as financial institutions under the BSA and other AML laws, rules, and regulations. Internationally, it would be ideal to have a centralized repository of beneficial ownership information accessible to financial institutions and law enforcement. Efforts are beginning in some countries to centralize this information, but privacy laws and concerns about confidentiality are often a stumbling block to the sharing of this type of information.

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