Anti-money Laundering Compliance - The Case for a Global Enterprise Wide Standard

The Case for an Enterprise-wide Standard for Anti-money Laundering ComplianceApril 2016

2Copyright © 2016 Accenture. All rights reserved.

Executive SummaryFinancial institutions’ anti-money laundering (AML) compliance programs should contain appropriate policies, standards, processes and procedures to adequately address their firm’s risk profile and to monitor and control AML risk. For consolidated and centralized global AML compliance programs, consistent enterprise-wide frameworks should be leveraged for making AML risk decisions.• The differing regulatory regimes faced by

global banks have resulted in regional or local focus being placed on AML compliance programs. However, the increased complexity of regulations and heightened scrutiny from regulators have prompted financial institutions to increase spend in AML compliance globally, in particular the areas required for adherence to multiple regulatory regimes.

• Traditionally, AML policies within financial institutions have varied across jurisdictions. Bespoke detailed policies and guidance (or standards) are often developed to be specific to a particular region and/or line of business. Frequently, the variation in AML standards result in inconsistent approaches to implementing AML compliance programs and conflicting AML risk decisioning across the firm. However, we are seeing the focus shift to reducing jurisdictional variance in policy and standards in an effort to drive enterprise-wide clarity and consistency.

• In order to help transition towards enterprise-wide standards, financial institutions should take a pragmatic approach to harmonize their regional and line of business standards. Multi-regional and cross line of business standards should be identified and leveraged to form the basis of a common enterprise-wide standard.

• To begin to develop an enterprise-wide standard, a structured approach is critical to encourage that the appropriate rigor is practiced to identify, and migrate individual standards into an enterprise-wide framework. The implementation of an enterprise-wide standard should be viewed as a source of competitive advantage for banks and financial institutions, facilitating a consistent, simple and effective response to financial crime threats and adherence to AML regulation.

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“Authorities have scrutinized large banks with global footprints for AML Compliance in connection with alleged oversight and monitoring deficiencies of their international activities.”2

“Regulators appear to have increasingly high expectations for banks regarding their Know Your Customer (KYC) and anti-money laundering (AML) policies and tools. Financial institutions are struggling to keep up with the pressure of those raised expectations.”1

What is Driving a Need for Consistent Standards?The differing regulatory regimes faced by global banks typically resulted in a local focus on AML compliance. This brought about increasing costs for compliance across banks as each jurisdiction required customized anti-money laundering (AML) policies, standards, and processes. Penalties levied by US regulators for shortcomings in local policies and standards highlight the need for a more consistent way for banks to manage AML risks.Increased Regulatory Expectations

Recent Supervisory / Enforcement Actions

Less Infractions, Increased Penalties

“The year 2014 was marked by record-setting fines and precedent-setting criminal prosecutions and enforcement actions against financial institutions for violations of BSA/AML and sanctions laws. In addition, individuals faced personal liability and public accountability for their actions and for compliance-related deficiencies within their areas of responsibility.” 4

“The increasing number of regulations that businesses need to remain in compliance with is set to lead to a much larger focus on operations such as anti-money laundering (AML) processes in the coming years.This is according to new figures from Research and Markets, which estimate global spending on this activity is set to grow to more than $8 billion (£4.78 billion) by 2017. This equates to a compound annual growth rate of almost nine per cent over the forecast period.” 5

Record Fines and Precedent-Setting Prosecutions AML Spend to Surpass $8bnIncreased penalties from Bank Secrecy Act and AML violations …

leading to increased investment in AML Compliance

In 2014, the Federal Reserve Board issued 11% less enforcement actions for anti-money laundering infractions from 2013. However, the banks paid seven times ($351 million) the fine levied the previous year.3

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Regional Standards Requirements

Traditionally, banks have designed and implemented policies and standards to address the specific requirements of an operating region. The result of this approach has often led to variation across operating regions in how anti-money laundering (AML) risk is monitored and managed.

How have Banks Typically Responded to Multi-jurisdictional Standards Requirements?

• There is variation in standards across regions driven by banks responding to regional regulatory bodies

• Focus is on local regulatory compliance and meeting specific jurisdictional requirements

• Custom-built internal control structure concentrated on local and/or regional banking operations resulting in limited enterprise wide effectiveness

• Disparate information for enterprise senior management on AML compliance initiatives and compliance deficiencies

• High costs due to multiple systems and controls to monitor and manage AML compliance

• Multiple and inconsistent approaches to AML compliance and AML risk decisioning

• Dispersed accountability and management for AML compliance

• Limited enterprise alignment and cross regional learning

North America

Europe

Asia Pacific

Middle East and Africa

Latin America

Oper

atio

nal R

egio

ns

Standards Requirements


North America

Europe

Asia Pacific

Middle East and Africa

Latin America

Oper

atio

nal R

egio

ns

Standards Requirements

• Agreed cross-regional and/or jurisdictional standards with some local adaptability on an exception basis

• Cross-regional focus and enterprise alignment in setting out guidelines for regulatory compliance

• Standardized internal controls with minimal regional variation where required

• A single agreed upon approach to systems and controls to monitor and manage AML risk within banking operations

• A single authority with central accountability for AML policies and standards

• Single agreed upon enterprise-wide standard enables shared processes and infrastructure

An emerging practice is for banks to agree to a baseline enterprise standard that spans all operating regions. This standard should be based upon a globally consistent level of attainment in which to conduct AML processing across all of the financial institution’s operating regions and lines of business.

What is the New Way to Respond to Multi-jurisdictional Standards Requirements?

Agreed Standard

Globally Agreed to and Enterprise-wide Consistent Standard Requirements

Specific additional requirements

Necessary uplift requirements


• Focus on agreed upon baseline enterprise-wide standard that is applicable across jurisdictions and lines of business

• The agreed enterprise-wide standard should be more stringent to meet jurisdictional requirements

• Should also be less restrictive than local jurisdictional requirements—these are addressed on an exception basis

• Enterprise-wide control frameworks help deliver consistent, pragmatic solutions across lines of business and/or regions

• Helps establish standardized processes and infrastructure, and leverages economies of scale in processing, intelligent workflow routing, and shared services

• Cost efficiencies through consolidated systems and standardized AML processing

The focus for anti-money laundering (AML) standards has shifted to reducing jurisdictional variance and driving enterprise-wide clarity and consistency. Establishing an enterprise-wide standard, cascaded down through the lines of business and regions, is a first step in improving consistency in infrastructure, services, and decision making.

Why Should a Financial Institution Leverage an Enterprise-wide Standard?

Standards

Enterprise-wide

Line of Business

Regional

Local

Enterprise

Standard

PBCIB CB RB

BRUS CA UK FR UAE HK JP

LATAMNA EU MEN

A APAC


Type of Standards Descriptions

Enterprise-Wide

• Mandatory agreed upon common standards. Applicable cross line of business and cross jurisdiction throughout the firm.

• Centrally stored, accessible by all lines of business, regional/local teams and management

• Singularly owned by the global Financial Crimes Compliance function and the firm-wide AML Compliance Officer.

Line of Business

• Mandatory standards that are specific to a line of business, subsidiary, service, customer type or product.

• Maintained centrally by the line of business, however accessible throughout the firm with additional requirements/variations from the global standard identified and tracked.

• Devised in concert with global Financial Crimes Compliance, but owned by the line of business compliance officer.

Regional• Mandatory in region AML operating standards. • Devised in region, but shared with global Financial Crime Compliance

to help identify and track variance and/or additional requirements.

Local

• Local AML standards specific to a particular jurisdiction.• Provides for the explicit local statutes that are not captured through

the enterprise, lines of business or regional standards.• Devised in country, but shared with global Financial Crime

Compliance to identify and track variance and/or additional requirements.

• Locally owned by country compliance officer.

An enterprise-wide anti-money laundering (AML) standard is an agreed upon baseline applicable across all lines of business and operating regions. However, it may continue to be necessary to implement additional standards to address areas not covered within the baseline.

What are the Common Characteristics of the Various Standards?


To transition to an enterprise-wide standard, a financial institution should take a pragmatic approach to help harmonize their regional and line of business standards. Multi-regional and cross line of business standards should be identified and leveraged to form the basis of a common enterprise-wide standard.

What is the Journey to an Enterprise-wide Standard?

• Each line of business (LOB) and region has bespoke standards.•No common standards or guidance on policy across either LOB or regions.• Each LOB’s understanding of policy may differ, with alternative approaches to implementation.

• Common standards are shared across some geographies within certain lines of business. •Guidance is consistent for geographies under similar regulators, with separate guidance for those that differ significantly.• Limited shared standards across lines of business.

• A single global standard

is developed for each LOB. • The standard documents the minimum requirements to be met in each geography that a LOB operates within.• Any regional variations are captured as a regional addendums to the global standard.

• A single firm-wide standard, capturing the minimum requirements that each LOB and region should meet is developed.• Additional guidance for LOBs due to product/customer-driven variations is captured as addendums.•Uniform solutions to meet requirements are implemented across all LOBs.

CIB

Corporate and Investment Bank

WM Wealth Management RB Retail

Bank

Current position of most institutions

Global StandardCorporate and Investment BankWealth ManagementRetail Bank

Multi-regional Standards

Enterprise-wide StandardEnterprise-wideLines of BusinessRegionalLocal

Geo 1

Discrete Regional Standards

Geo 4

Geo 3

Geo 2

WM

RB

CIB CIB

RB

WM

Geo 1

Geo 4

Geo 3

Geo 2

CIB

WM

RB RB

WM


Review organization AML risk appetite

Identify existing gaps to enterprise-wide standards requirements

Define and prioritize portfolio of initiatives to implement enterprise standard

Implement cross LOB and

regional central framework

Review existing policies and standards

Design and document cross-LOB and region standards

Define roadmap to remediate gaps to enterprise standard

Implement LOB and regional specific standards and controls

Identify common requirements across regions and LOBs

Identify LOB and region specific standards requirements

Design exception handling process

Document local requirements incremental to standard

Agree to requirements for global policy and standards

Design and document LOB and region specific standards

Document rationale and traceability matrix

Identify global and local processes and tools impacted

To begin to develop and implement an enterprise-wide standard, a structured approach is critical to encourage that the appropriate rigor is practiced to identify, and migrate the new standard to a firm-wide framework.

How is an Enterprise-wide Standard Implemented?

Enterprise-wide Standard

Traceability to Policies and Regulations

Policy GuidanceProgram Management

Stakeholder CommunicationsException Handling

ImplementationAgree to enterprise standard Define roadmap to implement

Identify existing gaps to standard


Key Implementation Consideration Include:

Stakeholder Engagement

• Enterprise-wide standards should have appropriate senior stakeholder sponsorship. Consideration should be given to regular interactions with regions, including face-to-face kick-off sessions.

Common Nomenclature

• Define templates with common language when drafting regional policies, restricting bespoke regional content to specific topics or sections.

Cross Functional Technology

• Designated and cross-functional compatible technology should support implementation across local, regional, and enterprise-wide functions.

Transparent Communication

• Establish communication channels as well as reporting features and forums to support a proper, accurate and effective implementation.

Regional Buy-in• Allow sufficient time for regions and lines of business to

review and contribute to enterprise-wide standards, encouraging their full ownership of the new standards.

Supranational Guidance

• Review guidance from supranational bodies such as the Wolfsberg Group6 to drive a baseline for an enterprise-wide standard and provide support to regional leadership when needed.

As banks and financial service institutions start to think about defining and implementing an enterprise-wide standard, there are a number of techniques that can help the transformational journey of the organization.

What are the Key Implementation Considerations?

Copyright © 2016 Accenture All rights reserved.

Accenture Point of View:– Reducing the Cost of Anti-Money Laundering• https://www.accenture.com/AMLCompliance

– Building a Sustainable Back Secrecy Act and Anti-Money Laundering Program• https://www.accenture.com/us-en/insight-anti-money-

laundering-and-bank-secrecy-act

Accenture Fraud & Financial Blog:– Global, Consistent Standard Can Help Anti-Money Laundering

Efforts• http://fsblog.accenture.com/finance-and-risk/global-consistent-

standard-can-help-anti-money-laundering-efforts/11

For More Perspectives on AML

https://www.accenture.com/us-en/insight-reducing-the-cost-of-anti-money-laundering-compliance.aspx?c=fs_frdfincrmsldshr_10000006&n=smc_0815

https://www.accenture.com/us-en/insight-anti-money-laundering-and-bank-secrecy-act?c=fs_frdfincrmsldshr_10000005&n=smc_0815

http://fsblog.accenture.com/finance-and-risk/global-consistent-standard-can-help-anti-money-laundering-efforts/?c=fs_frdfincrmsldshr_10000007&n=smc_0815

12Copyright © 2016 Accenture All rights reserved.

Glossary• CIB – Corporate and Investment Bank• CB – Commercial Bank• PB – Private Bank• RB – Retail Bank• NA – North America• LATAM – Latin America• EU – Europe• MENA – Middle East and North Africa• APAC – Asia Pacific

• US – United States• CA – Canada• BR – Brazil• UK – United Kingdom• FR – France• UAE – United Arab Emirates• HK – Hong Kong• JP - Japan


References1. “Taking the Next Step in KYC and AML Compliance,” InformationWeek Bank Systems &

Technology, March 5, 2014: http://www.banktech.com/compliance/taking-the-next-step-in-kyc-and-aml-compliance/d/d-id/1296879?

2. “Regulators Renew Their Focus on Anti-Money Laundering Compliance,“ Skadden, January 16, 2014: https://www.skadden.com/insights/regulators-renew-their-focus-anti-money-laundering-compliance

3. “Regulators Issued Fewer AML Fines in 2014, But Packed a Bigger Punch,” Kaufman Rossin Fund Services, February 24, 2015: https://krfs.com/news/regulators-issued-fewer-aml-fines-in-2014-but-packed-a-bigger-punch/

4. “2014 Year-End Review of U.S. BSA/AML and Sanctions Developments and Their Importance to Financial Institutions,” Sullivan & Cromwell LLP, January 29, 2015. Access at: https://www.sullcrom.com/siteFiles/Publications/SC_Publication_2014_Year_End_Review_of_US_BSA_AML_and_Sanctions_Developments.pdf

5. “Spending on AML operations 'to surpass $8bn',” Bureau Van DIJK, April 9, 2014. Access at: http://www.bvdinfo.com/en-gb/blog/compliance-and-due-diligence/spending-on-aml-operations-to-surpass-$8bn

6. The Wolfberg Group is an association of 13 global banks focused on developing frameworks and guidance for the management of financial crime risk. See: http://www.wolfsberg-principles.com/

http://www.banktech.com/compliance/taking-the-next-step-in-kyc-and-aml-compliance/d/d-id/1296879?

http://www.banktech.com/compliance/taking-the-next-step-in-kyc-and-aml-compliance/d/d-id/1296879?

https://www.skadden.com/insights/regulators-renew-their-focus-anti-money-laundering-compliance

https://www.skadden.com/insights/regulators-renew-their-focus-anti-money-laundering-compliance

https://krfs.com/news/regulators-issued-fewer-aml-fines-in-2014-but-packed-a-bigger-punch/

https://krfs.com/news/regulators-issued-fewer-aml-fines-in-2014-but-packed-a-bigger-punch/

https://www.sullcrom.com/siteFiles/Publications/SC_Publication_2014_Year_End_Review_of_US_BSA_AML_and_Sanctions_Developments.pdf



http://www.bvdinfo.com/en-gb/blog/compliance-and-due-diligence/spending-on-aml-operations-to-surpass-$8bn

http://www.bvdinfo.com/en-gb/blog/compliance-and-due-diligence/spending-on-aml-operations-to-surpass-$8bn

http://www.wolfsberg-principles.com/

http://www.wolfsberg-principles.com/


The Case for an Enterprise-wide Standard for Anti-money Laundering ComplianceDisclaimer: This presentation is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals.

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