Posted by & filed under AML General.

If you are available Thursday, October 19, 2017 at 1:00 pm (EST) consider joining me for ACFCS’ free webinar on “How AI, Automation, and Regtech are Impacting Compliance Careers Webinar”.

I had the opportunity to first give this presentation as a much smaller round table discussion and I am very happy that ACFCS decided to open it to the general public as a free webinar.

Below is the description of the webinar.  Hope you can join!


Artificial intelligence, automation and the rise of Fintech and Regtech will affect how financial crime compliance professionals are doing their jobs currently and what is likely to change in the future.

The session will look at the future of staffing and examine the experiences, skillsets and knowledge that will be required of AML, fraud, sanctions, and similar roles in this new reality.

Attendees will learn:

– How AI, AML and automation can affect their jobs
– What skills may be required to be in-demand in the current and near future
– How financial institutions are adopting and adapting to new tech developments
– How new technologies can both support and challenge financial crime compliance programs

Hosted By:

Chris Focacci, CIO, TransparINT

Chris Focacci is the CIO of TransparINT a financial crime compliance technology firm focused on CDD, KYC and CIP challenges to help financial institutions better identify risk. He was also the founder of an AML job search site and was a financial crimes investigator at Citi.

Register here!

Posted by & filed under AML General, Negative News.

easy-aml-complianceAt my twin daughters’ 7th grade back to school night last week I was forced to relive my horror of Algebra 1.

As the parents walked into the classroom, the teacher handed us an index card and told us to complete the problem on the board.  “Show your work or no credit, and your kids will be the ones grading,” she said.

The next day my daughters let me know that I got zero credit.  It was as though I was sitting back in 1983, when I first realized a career requiring math skills was probably not in my future.

Math isn’t the only place though where we must show our work.  Turns out AML requires the same thing.

In fact, “showing your AML work” aka, “documenting files” is where analysts and investigators spend most of their time.

Excited AML executivesDocumentation is critical to maintain strong compliance.  However, documenting work is inefficient and detracts from more important tasks.  This is particularly the case when it comes to documenting negative news searching and results.

Fortunately, all negative news documentation can now be automated, freeing up investigators to spend more time on work that matters.

Why We Document AML Work

Just like in Algebra, AML investigators must document what they do so that others (managers, auditors, regulators) can assess whether decisions, like filing a SAR, are supported by sound reasoning.  If an EDD analyst decides to recommend raising a customer’s risk rating from “moderate risk” to “high risk,” because there is an article reporting the customer is entering the (legal) marijuana retail business, having a copy of that article in the file is essential.

AML analysts and investigators also document their work to prove they did work in the first place.   As every AML analyst, investigator, and manager knows, documentation requirements eat up enormous time.  As much as 50% of AML work is copying, cutting, pasting, taking screen shots, and creating PDF’s.

This time would be better spent analyzing more alerts, investigating more cases, and conducting more EDD reviews.

Documenting AML Work Is Monotonous and Slow

Let’s look at how many banks require investigators to document negative news searching.

  • Investigators are often required to show evidence of what name they searched. If the case is about Troy Bolton, they take a screen shot showing “Troy Bolton” in the search bar. Some banks also require investigators capture any search terms or search strings they use to better target their searches, meaning another screen shot.
  • Then there is a screen shot of results, or in the case of Google, a screen shot of a portion of the first page of results. This is so a reviewer or auditor sees that a search was conducted and something was found.  Of course, no-one takes a screen shot of the 50,000 results Google returns.  But why not?  This screen shot is meant to show whether something relevant or not was found, so why only show fewer than 10 results?
  • If an investigator decides to open and read any of the results, he or she will then take another screen shot of what they read. This makes sense of course since these results will often support the investigator’s decision about whatever action they recommend (filing a SAR for example).
  • Interestingly many AML departments require investigators document their review of results that end up not being relevant. For those that must do this, you know the pain.  Proving the negative is becoming the norm in AML.

Doing this over and over again, all day long takes a lot of time and is inefficient.  What is the value of that time and how could it be better spent?

Documenting AML Work Is Now Simple and Fast

In 2017 computers can complete monotonous human tasks.  For AML analysts and investigators this means negative news documentation where copying, cutting, pasting, and screen shots are no longer needed!

Reducing inefficiency, improving investigations, and increasing output of every AML worker is a shared goal.  This is now achievable.

Showing your work is a critical part of AML.  It should be easy to do.

If only Algebra was.  That problem I had to solve was this:  2(x-5) = -16.  Remember, show your work.

This is the fourth post in a series.  See part 1,  part 2, and part 3.

Posted by & filed under AML General, Negative News.

The real estate market is hot…especially for money launderers.

The purchasing of real estate with illicit proceeds is not a newly identified method of money laundering, yet it continues to be pervasive with drug traffickers, corrupt officers, and criminals.

In a way, this should be one of the more difficult ways to launder funds, as there are so many gatekeepers involved in a real estate transaction:  real estate agents, lawyers, bankers, mortgage brokers, accountants.  There are many opportunities to detect and report suspicious activity at various stages throughout the purchase.

However, there are no mandatory SAR filing requirements for many professionals working in the real estate industry, thus enabling criminals to utilize these loopholes and blind spots.  Criminals can launder billions of dollars a year through shell companies or via all-cash purchases of luxury properties throughout the world.  Purchasing real estate through these methods “cleans” dirty money, allows large sums of money to be easily legitimized, and avoids the instability of market fluctuations.

Just last month, reports came out on Transparency International’s finding of Australia as an attractive haven for money launderers.  The country’s AML laws do not cover real estate agents, lawyers, and accountants and therefore these “gatekeepers” are not required to report suspicious transactions.

FinCEN’s Geographic Targeting Orders

Hitting a bit closer to home, last week FinCEN announced the issuance of revised Geographic Targeting Orders (GTOs) requiring US title insurance companies to identify the individuals behind shell companies used to pay for high-end, high-value real estate in several metro areas in New York, Florida, California, and Texas.  FinCEN continues to view high-value all-cash real estate purchases as worthy of higher scrutiny, as some version of this GTO has been issued since July 2016.

A FinCEN advisory was also released on the importance of filing SARs related to the purchase of real estate.  FinCEN included an interesting section on the value of voluntarily filing SARs by real estate brokers, escrow agents, title insurance brokers, and others involved in the real estate purchase.

For those of you working at a financial institution, the BSA and USA PATRIOT Act requires that SARs be filed on suspicious real estate transactions.

Red Flags to Look For

For an investigator reviewing transactional activity related to the purchase of real estate, here are some red flags to look for:

  • Property is purchased through anonymous shell companies or trusts
  • Property is purchased via companies with complex or opaque ownership structures
  • All-cash transactions
  • Value of real estate transaction is disproportionate to KYC profile on client
  • Real estate transaction is inconsistent with other activity identified in the account
  • Negative information identified on purchaser or shell company involved

While many (hopefully most!) real estate transactions are purchases from a client’s legally gotten gains, these red flags should be considered in connection with the entirety of the activity in the account, the customer’s profile on file, and the negative news identified on a party.

While TransparINT cannot determine the legitimacy of a real estate transaction, we can help you identify the most relevant negative news and risk information related to any of the parties to the transaction!

Posted by & filed under Beneficial Ownership, Research & Investigation.

Anyone who has spent time in a KYC group knows the challenges of trying to identify the beneficial owners of companies with complex structures.



Even when new clients are cooperative about providing ownership information during onboarding, there are many cases when there is just no simple way to understand the ownership structure without breaking out the calculator and charting it on paper.

Could there be a better way?

For a long time I have wanted to create a KYC tool that not only helped visualize complicated ownership structures, but also calculated ownership percentages across multiple levels.  But since TransparINT’s core focus is building tools focused on negative news and publicly available risk information, and we have had our hands full with our expanding client base,  I have not been able to dedicate much time to the idea.  Enter Hudson Harriman-Smith; a promising young computer science student from Wesleyan University.  Fortunately, we had the opportunity to have Hudson on board this summer as a Web Development Intern, and he has provided the extra bandwidth to take on the project.

Our new and completely free Beneficial Ownership Tool provides a user interface to chart simple or complicated ownership structures.  Once the structure is mapped, there is an ownership calculation feature that determines the percentage owned of the target company through each parent company back to the individual owners.  This is the approach many KYC groups currently use to calculate ownership percentages to meet the new CDD rules.

How does it work?

To get started creating ownership structures, simply click on the company icon on the center of the page and add parent companies, subsidiaries, or individual owners as necessary from the pop-up form menu.  Names and ownership percentages can be added to all nodes in the graph.



Once the structure is complete, click on the target company, and select the “Show advanced ownership relations” button to see how much each of the parent companies own of the target company through their respective subsidiaries. 

calculate UBO


The calculated percentage will appear in parenthesis next to every parties’ name, allowing users to easily identify which individual owners have the most control.



Free!? Is there a catch?

Nope, no catch.  Go nuts with it.

Over the course of my career I have conducted KYC reviews on thousands of companies, and this is a tool that I always wished existed, so I am happy to be in a position where I can help make it a reality for all of the AML/KYC analysts who have to do this work everyday.

We hope that you find it useful, and it makes your job of identifying beneficial ownership a little easier.

Posted by & filed under Negative News.

Third in a series.  See part 1 and part 2.

aml-efficiency-part-3Current ways of reviewing negative news results are monotonous, frustrating, and harmful to AML compliance.

Negative news is the best way to identify AML risk, yet reading piles of irrelevant results can zap the attention and spirit of every AML investigator.

So, a troubling paradox exists: The process of finding what matters most ends up weakening AML compliance.  Wading through endless irrelevant results wastes time better spent on meaningful work. The monotony erodes an investigator’s attention and initiative, increasing the likelihood of mistakes.

Reviewing Negative News Is a Grind

karate-kidYou’re an EDD analyst, a SAR investigator, or a transaction monitoring alert analyst. Day after day part of your responsibility is to search and review negative news results.  And, day after day you are confronted with having to read dozens or hundreds of profiles, news articles, and watch list hits.  At the forefront of your mind is this reality:  the vast majority of what you will read is either irrelevant or incomplete.

That is depressing.

Yes, all jobs have tasks that are boring and leave you questioning, “Why am I doing this?”  But, unlike the skills Danny LaRusso gained by waxing on and waxing off, painting the fence, and sanding the floor, reading endless irrelevant negative news results has no purposeful benefit.

The Problems with Reviewing Negative News Alerts

For the past 15+ years, in order to find negative news, AML investigators use databases and/or search engines.  Both approaches have serious flaws.

Negative news databases create two big problems: (1) irrelevant results, and (2) incomplete information.

Search engines also present (1) too many irrelevant results, and (2) just too many results in total that no one has time to properly review (does anyone look at page 4 of Google results?).

Negative New Database Headaches

Irrelevant Results

“Irrelevant results” is a softer way of saying “false positives.”  Not much more explanation needed.  Everyone in AML knows the frustration.  A full explanation why negative news databases return so many irrelevant results is its own topic for a future blog.

But in sum, negative news databases return so many false positives because people’s names are not unique identifiers, basic key word searches used by databases are outdated, and negative news databases don’t incorporate modern computer science.

Problems with Profiles

Negative news databases typically provide a “profile” for an investigator to labor through.  These profiles contain multiple fields such as date of birth, passport number, and aliases.  Most of the time these fields are blank and serve no purpose other than to distract an investigator trying to process endless information all day long.

Included somewhere in these profiles is a short snippet summarizing whatever negative news items relate to the result.  This synopsis is never enough information on which to base a decision, so the investigator clicks the web link included in the profile.  And then, as the link is launching, the investigator waits to see the dreaded, “404, Page Not Found” error code.

What a waste of time.

Now the investigator, believing there may be something important, leaves the negative news database, goes to Google and begins searching the world-wide web, asking themselves, “Why do I even use the database in the first place?!”

Search Engines Challenges

Seeking some measure of confidence, and hoping to avoid the consequences of missing critical information, the investigator goes to Google and starts the negative news process all over again.  If they are lucky, the search name is unique and the investigator must only look past a few advertisements, LinkedIn results, Twitter feeds, and Facebook accounts before they spot the negative news.

If they don’t see what they think they are looking for right away, they either continue to page through results until their eyes glaze over, or start the search process over yet again this time devising a search string that will hopefully return better results.

This is AML in 2017.

A Better Way to Review Results

Instead of relying on methods devised in 2005, AML investigators today should expect to use negative news applications that are simple, fast, and enable them to make better decisions.

Negative news results should be relevant and they should be scored so an investigator can see what is important and move quickly.

Results should be easy to read, and there should be far fewer of them.

It is time AML applications support the way investigators want to work.  Investigators should not have to adapt their work to the limitations of the systems they are forced to use.

Next week in part 4 of the series, we discuss a better approach to documenting negative news work.  The days of manual and monotonous steps of copy, cut, paste, screenshot, and PDF – another huge waste of time, are finally over.

Posted by & filed under Research & Investigation.

A while back, I wrote an article with tips for evaluating a website when conducting online research.

While all of the information in the original article still holds true, I thought it was a good time to post another article with some additional investigative resources and techniques.  The first article covered three tools to help obtain background information on a website:

  • Whois Lookup
  • Internet Archives: Wayback Machine
  • Reverse Image Search

Below are three additional tools and techniques to gain additional insight into a website.


Map a site with Visual Site Mapper

Visualizing the layout of a website can help identify useful sections of a complex site that may have otherwise been overlooked.  Visual Site Mapper can quickly crawl and display a graphical layout of a website’s internal link structure.

Simply enter the URL of the website that you want to map, and press the “Get Map” button.  Each graph node represents a page of the website, and hovering over a node will highlight all of the other pages that page links to.

Website Graph




Link websites with Google Analytics code

Google Analytics is a popular service that allows webmasters to track statistics such as the number of website visitors per day, visitor location, and time spent on the site.  Webmasters are able to do this by including a piece of tracking code on the website.  The tracking code includes a unique Google user account number that can link multiple unrelated sites to a common owner.

The tracking ID can be identified in a webpage’s source code, which can be viewed by right clicking on the page and selecting “View Page Source”.  The user ID will start with “UA” and then contain a string of numbers, as seen below.

GA Code Snippet

Once you have obtained the ID, you can enter it into a lookup tool that aggregates website information, such as, to identify any other websites linked to that account number.  It is also possible to skip the above step, and just search the website URL directly in SpyOnWeb to obtain the Google tracking ID for the site, and other website information.

spy-on-webA more in-depth write-up on using tracking codes to link websites can be found here.  An interesting real-world case study using this technique as part of an investigation into news websites, can also be found here.


Scan a website for malicious content

The web can be a dangerous place.  VirusTotal provides an interface to scan a website URL against over 60 antivirus scanners and URL/domain blacklisting services, in addition to providing other URL analysis features.  A user can select a file from their computer to be scanned or enter a URL in the browser interface.  An API is also available to submit searches programmatically.


Posted by & filed under AML General, Negative News.

Second in a series.  See part 1 here.


Searching for negative news is among the most inefficient, inconsistent, and risky parts of AML.

Whether new customer KYC, high-risk customer EDD, or suspicious activity investigations, negative news searching involves too many systems, too many manual steps, and too much likelihood something critical is missed.

No wonder every AML investigator remains frustrated about this part of their job.


Negative News is the Best AML Risk Indicator

Searching for negative news is often the best way to identify AML risk. A news story about a customer’s involvement in a corruption scheme tells us more about risk than a wire transfer to Brazil.

nsyncThere is no defensible explanation when an auditor, or worse, a regulator, finds negative news that an investigator failed to find. It may be the difference between a good exam and a disaster.

Yet searching for negative news has changed little over the past 15 years. AML investigators are using the same approaches today as they did when N’Sync said bye, bye, bye at their last group performance 15 years ago in 2002.


Breaking Down Negative News Inefficiency

Negative news searching is inefficient for three main reasons:

  1. Existing negative news databases are small and miss more information than they find.
  2. Because of this, every AML investigator ultimately relies on Google.
  3. Google (and Bing) are not designed for AML investigators.


Existing Databases are The Facade of Negative News

Negative news databases have been around for 20 years and most AML departments subscribe to one or more of them. Using these databases give AML officers and regulators a sense of comfort. Unfortunately, it is a false sense of comfort. Most know it and those who don’t should. Why?

I have asked this question hundreds of times to AML officers: “So, you use, (insert name of negative news database here) to find negative news. Do your investigators also use Google?”

Answer 100% of the time: “Yes. Of course.”

Let that sink in for a moment.

Banks spend significant money on these databases, in some cases hundreds of thousands of dollars a year, and yet everyone relies on free search engines because they know that the negative news databases fail to find needed information. (Here is the reason for this).

Despite the fact negative news databases contain few of the records you need, they still somehow generate piles of false positives.

And it is crazy that when negative new databases identify a potential match, the AML investigator still must go to somewhere else (Google) to finish their investigation. Database profiles are incomplete and the hyper-link to the original news report is typically no longer active!

Using multiple databases and search engines is inefficient, adds time to every piece of work, and still does not ensure negative news is found.


Search Engines are Inefficient AML Tools

Search engines are better than negative news databases and therefore everyone in AML uses them. However, search engines are not designed with AML investigators in mind. Because everyone fears they will miss information and later be blamed, investigators compensate by conducting multiple Google or Bing searches which just keeps adding more time to work.

There is no consistent approach to how to use search engines to find negative news. Attempting to bring a measure of consistency though, AML investigators use “search strings” hoping to target negative news and reduce irrelevant results.

Search strings help, but are still insufficient. Google places limits on the number of search words allowed in each string. This means investigators are faced with two unappealing options: (1) Hope the search string they used was good enough or, (2) conduct multiple searches using different search strings adding yet more time to their work.


Calculating the Inefficiency

Because of the problems with negative news databases and challenges using search engines, what should be a simple and fast process ends up take two, three, or four times as long. What is the impact of adding 5, 10, or even 15 minutes to negative news searching on every alert, every investigation and every EDD review?

Inefficiency builds slowly. One extra step here, another extra step there, and soon the AML officer is wondering, “Why does clearing an alert take so long?” and more concerning, “Am I going to have to hire more people again next year?”


Achieve Efficiency and Better Searching

Searching for negative news should be simple, fast, and encompass exponentially more information than existing negative news databases provide. Relying on creative Google or Bing search strings still leaves gaps and takes unnecessary time.

It is nuts that in 2017, investigators are still relying on tools built for an AML world that existed more than 15 years ago. It is time AML investigators were given tools that enable them to move faster and complete work with a stronger sense of confidence.

One or two searches in just one application should be all that is needed to find something negative, or, just as importantly, be confident there is nothing negative to find. Picture the productivity gains and improvement of AML if investigators needed to only conduct one search and know immediately if there was something negative or not.

Instead of adding 5, 10, or 15 minutes to each EDD, alert, or case investigation, you’d be reducing work by that much. This adds up significantly over a day, a week, a month, a year.

Using modern computer science, AML teams can now do this.

Next week we discuss the frustration and inefficiency investigators face when reviewing negative news search results.

Posted by & filed under AML General, Negative News.

This is the first post in a series addressing inefficiencies in current AML processes and practical solutions to the most prevalent issues.


I spend my days speaking with AML Officers, FIU Directors, and the investigators and analysts that spend their days completing EDD reviews, transaction monitoring analysis, and case investigations.

I can distill those hundreds of conversations over the past year to three words:




The cost of inefficiency is incalculable, and the most concerning impact of inefficiency is the opportunity cost.  What isn’t getting done because of outdated technology and the heap of manual work steps that keep piling up?

Inefficiency Harms the Real Purpose of AML

I have been in AML since 1996 (yes, AML is that old). Over those 20+ years I have seen a lot, and sometimes it is easy to feel a bit cynical.  But I still believe those in AML serve a vital purpose. We are part of a global effort to detect and help law enforcement combat evils like narcotics trafficking, human trafficking, crimes against children, and terror financing.

But when does this get done amidst all the checking of boxes, endless new work steps, and struggling with clunky old systems?

How AML Inefficiency Can Be Fixed

So much of AML is inefficient and there are a lot of reasons for this, but instead of dwelling on those reasons, let’s discuss what can be done now to reduce inefficiency.  One part of AML at a time.

Why one part at a time?

It would be nice if all the steps in complex AML processes like detecting suspicious activity could be solved at once.  There is a lot in today’s AML media suggesting that we are on the cusp of magical Artificial Intelligence (AI) that will do just that.  “My CEO said we need to wait for AI and then we can cut our AML costs,” is a sentence I hear often from AML officers.

That ain’t going to happen anytime soon.

Big problems, like big puzzles, get solved one piece at a time.  As an example, let’s look at a big problem Uber solved and how the same framework applies to solving AML’s big problems.

For Uber to exist, it relies on the success of multiple technology applications.  To click an app on your phone and watch a car drive to you, Uber first needed a lot of things to fall into place. To name just a few:

  • The internet
  • Reliable Wi-Fi
  • Mobile phones
  • Mobile phones with Wi-Fi capability
  • GPS to work on handheld devices
  • Mapping software that plot precision points on a map app.
  • Mobile payment systems
  • Payment security

It took years of trial and error to make each of these parts of the “stack” work.

Solving AML’s problems is similar.  Solutions to improve quality and reduce inefficiency of the many multiple parts of AML must be created, refined, and perfected a piece at a time.

AML is Riddled with Inefficiency

AML processes for Enhanced Due Diligence, transaction monitoring alert analysis, and suspicious activity investigation each involve similar, and often the same, steps. Broadly speaking those steps include:

  • Reviewing transaction or other triggering alerts.
  • Obtaining, documenting and reviewing customer KYC information.
  • Reviewing transaction records.
  • Reviewing prior alerts and SARs when they exist.
  • Searching public record information.
  • Searching negative news, sanctions, watch list, and PEP information.
  • Conducting analysis.
  • Making risk management decisions.
  • Recording findings.
  • Creating a file of supporting evidence.
  • Having that file reviewed by management
  • Having that file reviewed (perhaps) by Internal Audit or the regulator.

Completing EDD, alert, and case reviews can take anywhere from a few minutes to many hours.  That time is riddled with inefficiency for many reasons, one of which is that investigators must access multiple systems to search, find and retrieve needed information.

For anyone who does this work, having to flip from one system to another is monotonous and eats away at time.  Believers in Artificial Intelligence say that will no longer be necessary.

One day, those believers will be right, but to get to that day, each of these AML steps must first be substantially improved before the AML stack functions in unison.

Fixing Negative News Searching

In this five part series, Bringing Efficiency to AML, we will dissect one of these required AML steps – searching for negative news. We will illustrate how new approaches and new technology like Machine Learning (a necessary precursor to AI) are now being used to substantially reduce inefficiency and improve quality of work in this area.

In dissecting the problems with negative news searching today and how it can be improved, we will publish four additional articles, each addressing one of the elements of negative news searching. These four elements are:

  1. Searching for negative news;
  2. Reviewing and analyzing results;
  3. File documentation and record keeping; and,
  4. Quality control, Internal Audit, and examiner review of work product.

Look next week to read about the inefficiency and risk of negative news searching and how solving these problem is now possible.

Posted by & filed under AML General, Negative News.

aml-broker-dealerThe SEC and FINRA announced that broker-dealer anti-money laundering (“AML”) programs continue to be a focus and priority for 2017.

While most, if not all, broker-dealers likely have some form of AML program, this continued focus by the SEC and FINRA indicates that having just any program is not enough.

Key Aspects for an AML Program

Taking the SEC and FINRA announcements together, these are the key aspects for a broker-dealer to consider when implementing and reviewing its AML program:

  • How does a broker-dealer monitor for suspicious activity?
  • If suspicious activity has been found, have suspicious activity reports (“SARs”) been filed appropriately and timely?
  • Has a firm’s prior shortcomings identified by a regulator been remediated?
  • Has a broker-dealer’s AML program been tailored to the specific risks that firm faces?

The key takeaways appear to be that there is no “one size fits all” AML program.  AML programs must be able to be tailored, modified, and adjusted as trends and risks change.

Recent SEC and FINRA Actions

Recent SEC and FINRA enforcement actions further support this.

  • In June 2017, the SEC alleged that Salt Lake City-based brokerage firm Alpine Securities Corporation had violated securities laws by failing to file SARs for stock transactions flagged as suspicious, primarily involving microcap securities.  When SARs were filed, it is alleged that the firm omitted the “suspicious” – the very basis for the SAR filing – information from the form.
  • In May of last year, FINRA fined broker-dealer Raymond James $17 million for widespread failures related to the firm’s AML program.  Highlighted shortcomings included Raymond James’ failure to establish AML programs commensurate in size with its growth, inadequate procedures and policies, and failure to detect, investigate, and report suspicious activity.

What can be done?

The SEC and FINRA continue to examine broker-dealers’ AML programs for their effectiveness, adaptability, and accuracy.  This trend appears to be continuing, and all entities subject to AML requirements (broker-dealers, financial institutions, money services providers) must continue to improve and adapt their programs for emerging risks.

In a specific example, SEC and FINRA actions relating to deficiencies in AML programs for microcap securities have been increasing over the last few years.  In response to this increased scrutiny, the TransparINT team worked with a client to implement a negative news monitoring program on all companies contained in their microcap fund portfolio.  This let the financial institution passively monitor the news in real-time to identify new or emerging risk information on any of the companies.  As a direct result of this monitoring program, several of the companies and executives were identified to have been involved in SEC and Department of Justice actions involving “pump and dump” schemes and other illegal activity.

This program not only lessened the financial institutions AML risk exposure, but it allowed them to eliminate the workload burden of having to continually conduct manual negative news reviews on all the parties.

Proactive thinking tailored to a company’s specific risk profile is key to an effective AML program for all institutions, including broker-dealers.

Posted by & filed under AML General.


Last week 11 individuals were charged with laundering more than $40 million in drug proceeds back to Mexico through Atlanta-area money remitters.  What makes this case unusual is that 6 of the 11 individuals were directly responsible for BSA/AML compliance.

There has been a recent increase in personal liability enforcement actions against compliance officers for failing to adequately implement an AML  compliance function.  Most notably the former Chief Compliance Officer at MoneyGram was required to pay a civil penalty of $250,000 for failure to implement and maintain an effective anti-money laundering program.  Prior to that, Raymond James’ former AML compliance officer was personally fined $25,000  for allowing certain red flags of potentially suspicious activity to go undetected or be inadequately investigated.

But this is something entirely different.

The indictments allege that in exchange for kickbacks, managers and employees of nine different money services businesses agreed to launder purported drug funds to Mexico.   To circumvent the Bank Secrecy Act, the defendants allegedly tried to conceal the source of the funds by breaking the transactions into smaller amounts and by listing fake sender names, addresses, and telephone numbers.  In total, more than $40 million was transmitted over a four-year timeframe.

AML Officers Breaking Bad

break-badAttorneys, accountants, and other AML gatekepers have long been known to actively facilitate money laundering, but reported cases of AML officers working for the other side has been a less common occurrence.  But that doesn’t mean it never happens.  Earlier this year an anti-money laundering consultant was arrested as part of a multi-million dollar pump and dump scheme that sought to launder $2 million in illegal proceeds through offshore accounts.  The criminal complaint alleged that the consultant advised on the use of structuring deposits and creating anonymous shell companies to avoid reporting requirements.

In another previous case, the CEO and Chief Compliance Officer of a New York based Bitcoin exchange pleaded guilty in connection with the sale of approximately $1 million in bitcoins for use on the Silk Road website.  In his dual role as CEO and compliance officer, he was in charge of ensuring the company’s compliance with AML laws.

Should we be Worried?

So what does this all mean?  Is there now a new high risk client type to worry about…ourselves?!  Probably not.  Given the opportunity, there will always be a percentage of people that choose to do the wrong thing, and BSA/AML officers are no different.  In fact, as a group it could be argued that compliance folks are even more risk adverse than the general population, but that doesn’t mean AML officers can do no wrong.  Proper due diligence should always be conducted on all key hires (Know Your Employees), and any time a compliance officer holds potentially conflicting roles (like CEO and CCO in the above example), it should raise a red flag.

In conclusion, use TransparINT, it’s awesome. 😉