When regulators discuss the root causes of the problems in a financial institution’s Bank Secrecy Act and Anti-Money Laundering programs, invariably the cause that comes out at the top of their list is a weak culture of compliance. These points come from an advisory by FinCEN, the Financial Crimes Enforcement Network.
The regulatory agencies have found that poor BSA performance is as much about the culture of a financial institution as it is about the products, services, customers, and geographic location of the business. How does your compliance culture measure up? Give your financial institution an honest assessment of how well it measures up in each of the six areas below.
Compliance Cuture Scoreboard
Rate your organization’s success in each category on a scale of 1-5, with 1 being strong and 5 being weak.
Your board and senior management actively support and understand the institution’s compliance efforts. The commitment of an organization’s leaders is visible within the organization, and their commitment influences the attitudes of others within the organization. Your score ___.
Yours is an institution where efforts to manage and mitigate BSA/AML deficiencies and risks are not compromised by revenue interests. Compliance staff is empowered with sufficient authority and autonomy to implement your institution’s AML program. Your institution’s interest in revenue never compromises efforts to effectively manage and mitigate BSA/AML deficiencies and risks. Your score ___.
Relevant information from the various departments within the organization is shared with compliance staff to further BSA/AML efforts (several recent, significant enforcement actions highlighted failure to provide relevant information readily available to the BSA/AML compliance staff). Your financial institution recognizes that there is information in various departments within a financial institution that may be useful and should be shared with the compliance staff. Your score ___.
Your institution devotes adequate resources to its compliance function. This includes the designation of an individual responsible for coordinating and monitoring day-to-day compliance with BSA. This individual is knowledgeable of the BSA and has sufficient authority to administer the program. Your score ___.
5. Independently Tested
BSA/AML system effectiveness is tested by an independent and competent party. The BSA/AML program includes a proper ongoing risk assessment, sound risk-based customer due diligence, appropriate detection and reporting of suspicious activity, and independent program testing. Your score ___.
Leadership and staff understand the purpose of the institution’s BSA/AML efforts and how its reporting is used. Because of the overarching importance of BSA/AML functions, all levels of leadership and staff are provided training of what BSA reports accomplish and how they are utilized. Your score ___.
Overall score (average of the six areas above):_____.
Of course, it’s a good idea to consider how your institution’s compliance culture measures up to all six of these standards. But fora bonus point, dive a bit deeper into two of them, the first and the last, because these both have to do with making sure BSA compliance starts at the top with BSA leadership, meaning senior management and the board, not just the compliance officer.
Institutions with weak BSA/AML programs invariably suffer from a lack of support from the top. It just isn’t considered a priority. When a BSA compliance culture is properly established in the top ranks, it trickles down throughout the institution, and personnel exhibit confidence that their institution is committed to doing what it takes to achieve compliance, regardless of its circumstances.
So what does that commitment from the top look like? Try rating your institution against the following attributes on the same 1-5 scale to see how effective your board and senior management are at setting a strong foundation for BSA compliance.
Our board and senior management establish a strong BSA/AML compliance culture by:
- Establishing the institution’s attitude toward and approach to compliance. Your score ___.
- Ensuring the program includes quantitative analytics. Your score ___.
- Appointing a qualified and supported compliance officer. Your score ___.
- Ensuring proper staffing levels and institution-wide responsiveness to the compliance department. Your score ___.
- Requiring thorough reporting and review of key reports. Your score ___.
- Making certain that compliance risk assessments are updated. Your score ___.
- Ensuring independent tests are completed and reviewed when appropriate. Your score ___.
- Ensuring corrective action is taken as needed. Your score ___.
- Being ultimately responsible for making sure that your institution has an effective BSA/AML program that includes suspicious activity monitoring and reporting. Your score ___.
Bonus score (average of the nine areas above):_____.
If your institution’s top leadership can perform all these duties, then your institution will be well on its way to a culture of compliance. And remember, a good program provides reasonable assurance of compliance—not perfection—and is geared toward meeting the requirements of applicable laws and regulations in the most efficient manner possible.