• Review AML risk assessment, with particular focus on how current legal entities
are being classified
• Review automated transaction-monitoring systems and procedures to make
sure the results of their monitoring efforts are considered when reassessing or
reclassifying customers based on their risk
• Make sure that CDD rule requirements are implemented seamlessly across the
entire financial institution to avoid different risk classifications in different lines
• Develop — and periodically enhance — existing policies and procedures to
meet the technical requirements of the CDD rule and to align the technical rule
requirements with the financial institution’s risk appetite
The CDD rule represents a key development in the continued evolution of AML
compliance, and regulators today may place even greater focus on the nature of
customer relationships and transactional activity. It is critical that covered institu-
tions determine far in advance of the deadline whether additional resources will
2017 and Beyond
Although the evolving regulatory landscape poses significant challenges for financial
institutions, it might also present value creation opportunities for financial institutions that get it right. Having an engaged board of directors and establishing a culture
of compliance throughout the organization, a financial institution can position itself
to better recognize, identify and avoid potential risk exposure to AML compliance. abfj
SVEN STUMBAUER leads the Global Anti-Money Laundering and Sanctions Practice at
risks as they conduct business with affiliates in certain
jurisdictions. Therefore, it may be necessary for a financial institution to revise policies and procedures based
on the regions where it conducts business.
In another example, financial institutions might
want to consider adjusting their transaction-monitoring
efforts when conducting business in jurisdictions that
impose currency restrictions. Further, financial institutions should evaluate both inherent and perceived
risks associated with certain business activities and
relationships. This approach would be far more prudent
than ignoring problems or exiting certain relationships wholesale and calling it “de-risking,” as could be
observed in recent times.
Who is Your Customer?
In recent years, financial regulatory bodies in the U.S.
and Europe have increasingly emphasized customer
due diligence (CDD) as a means of combating money
laundering and terrorist financing. In May 2016,
FinCEN imposed formal CDD requirements,
2 and U.S.
financial institutions will have until May 11, 2018 to
comply with those rules. Most of the regulations that
are now codified in the CDD rule have been considered
regulatory expectations for some time, yet in light of the
formalization of those regulations, financial institutions
should consider taking the following actions:
Having an engaged board of directors and establishing a culture of compliance throughout the
organization, a financial institution can position itself to better recognize, identify and avoid potential
risk exposure to AML compliance.