Yikes!

As I’ve noted in earlier posts, Alacra’s federated searching and publishing tools are increasingly being used for client acceptance (CIP) and enhanced due diligence purposes.  So yesterday I attended the SIA Anti-Money Laundering Compliance Conference at the Grand Hyatt.  It was a superbly run conference with excellent speakers.  Hundreds of people attended; it was packed.  William Fox, the Director of  FinCEN (Financial Crimes Enforcement Network) of the US Department of Treasury spoke at lunchtime and at the end of his talk emphasized that all anti-money laundering efforts were based upon leveraging information. 

Some highlights:

• This was my first time at this conference but many people remarked at how much bigger it was this year compared to last.

• “Terrified” was a word used to describe the Street’s feeling towards AML compliance and the regulatory agencies.  The environment was further described as “poisonous”.

• The regulators though, especially the Treasury Department and FinCEN, appear extremely interested in working with industry to ease the tension between the parties and ensure the regulations are effective and make sense.

• Many of the questions asked of the regulators had to do with the ambiguity and, in some cases, the apparent conflicting requirements of the various regulations.  I was surprised to hear that people were asking for better FAQs on the web sites of the regulatory agencies.  One would think we’d be further along than needing better FAQs.

• If the vendors of personal data (ChoicePoint, LexisNexis, West, etc.) become unable to sell social security numbers due to stronger US privacy laws, the Customer Identification Process (CIP) will be significantly affected at most depository institutions.

• How do AML professionals stay current?  For example, if a firm gets cited or fined for some violation, how do they find out so that they can check if their firm may have the same problem?  They read the newspaper!  And it was pointed out that newspapers often don’t have all the facts or the level of detail necessary for a compliance officer to conduct a thorough analysis.

• The biggest AML compliance problem for the Street now seems to be determining and verifying the beneficial owners of various entities.

• The biggest AML compliance problem for the regulators is the defensive filing of SARs – Suspicious Activity Reports.  Since the guidelines as to when to file a SAR are unclear, firms are filing them, in some cases, purely to cover themselves.

• Riggs Bank, which was found guilty of severe AML non-compliance violations last year is now referred to as “The R Word” within the compliance community.

• There is a great deal of friction between business managers and compliance professionals at Wall Street firms.  From the business manager’s perspective, the compliance officers are getting in the way of doing business.

Clearly, I am not in the trenches of this effort.  But it seems to me based on talking to customers and attending this conference that the information challenges here are ripe for some industry-wide collaboration tools, a set of research best practices and (it’s hard to believe I’m saying this) some knowledge management discipline.  There were a ton of lawyers in the room yesterday but I doubt there were many information professionals.  There should have been.