The Changes in the US AML/ATF Arena Rudolph F. Zepeda, Jr. Federal Reserve Bank of Atlanta Miami Branch

Almost six years after the USA Patriot Act toughened banks' anti-laundering requirements, large banking companies continue to face massive fines for failures in their programs. More large fines are undoubtedly on their way

Banks Can Never Rest  Every time you think you have it covered, you constantly have to update what you do ABN Amro Holding NV $80 million but may receive a second penalty of nearly $500 million  FINCEN keeps updating its guidelines.

U.S. Government’s Concern  Treasury Dept. considering sweeping structural changes in U.S. financial services system, such as, consolidating regulatory agencies and combining charters of federal and savings institutions.  May put the primary responsibility on blocking those transactions on financial institutions and other payment processors that have banking relationships with Internet gambling companies.

Law Enforcement Latest Concern  Stop Money Laundering by Increasing fines and sanctions Forfeiture of assets which revert to the State Utilize Cash Transaction Reports (CTR’s) to follow the Money  Stop Terrorist Financing Increasing intelligence utilizing SAR’s  Consider the newest technological advances such as stored value cards as a vehicle to move funds.

Banker’s Concerns  Costs continue to increase in order to establish an efficient AML/ATF program In trained personnel Information technology (IT) Enterprise-wide programs  Throwing money at the problem doesn’t solve it and despite the cost can still result in fines and sanctions. (Union Bank)  Direct competition from non-regulated entities  Impatient regulators, who tolerated problems in the past because systems were being acquired.

Legislator’s Concern  The creation of a single, monolithic federal bank regulator, given the enormous power bank regulators have over financial institutions.  Increasing regulatory burden  Lessons from the recent sub-prime crisis require further regulation of non-bank financial institutions

Regulator’s Concerns  More detailed regulations and laws are on their way Banks have had 6 years to comply Bank directors have to take AML training seriously and incorporate into culture

Regulator’s Concerns The days when bank management tells us that a new system or new AML officer hires need time to improve the existing system are over.  If they have not made progress despite spending within a 12 month period  Supervisory actions and fines will increase if no progress has been made in an appropriate time.

Regulator’s Concerns  With the new legislation and GAO scrutiny Require more experienced personnel and Update examiner’s knowledge on new software and technology Expand AML examination programs to  Large Banks  Community Banks  And the need for SEC and NASD to step up AML compliance on broker-dealers.

Basic Elements of Sound AML Program for Broker-Dealers  A comprehensive assessment in order to determine the risks certain products and product groups pose for money laundering and terrorist financing.  A complete analysis to understand the universe of all transaction types the institution utilizes.  A comprehensive assessment to determine the risk the customer base poses for money laundering and terrorist financing.  Evaluate whether the commercial AML monitoring system to be implemented can be customized to the specific needs and trading activity of the broker-dealer, or whether the logic of the detection scenarios is "set in stone."  Determine the amount of post-implementation support the broker-dealer can expect from an AML monitoring system vendor.

Major Changes Affecting the Caribbean  Correspondent Bank Accounts Heightened scrutiny due to new issuance of updated Bank Secrecy Act/Anti-Money Laundering Examination Manual  Outlawing internet gambling  The shift by money launderers to trade-based money laundering.  The need to look at AML enterprise- wide