AML Compliance: 3 Takeaways for Boards

Boards often have significant legal obligations when it comes to creating detailed AML compliance programs that adhere to regulations and watching for signs of possible compliance failures. Here are 3 of the most crucial considerations for boards to make when determining what their organization’s approach to AML compliance should look like. 

1. Understanding AML Regulations and Legal Obligations 

Effective boards must have an in-depth understanding of general money laundering laws and the specific ways in which those regulations impact their organization’s industry. Directors and other organizational leaders are responsible for taking steps to ensure their organization’s transactions and other operations align with these regulations to protect the people they serve and their organization’s overall reputation. 

This is particularly important because boards can be held liable for AML compliance violations. Even if no board member was directly involved in money laundering, the board’s responsibility for knowing how money is being used and ensuring that compliance programs are followed often places it partially at fault if a failure occurs. 

2. Governance and Oversight Responsibilities 

An organization’s board of directors is responsible for setting anti-money laundering standards, ensuring other team members understand their importance and adhere to them. Prioritizing AML efforts from the top sets a clear precedent for an organization’s official policies. 

While the details of a board of directors’ role in compliance can vary from organization to organization, boards are generally responsible for creating, approving, and overseeing their organization’s AML compliance program. The board should appoint a compliance manager and compliance committee to handle most of the work involved with writing, approving, and enforcing each aspect of the organization’s compliance program. However, the full board should generally vote to approve the program. 

For proper oversight, boards should periodically review certain types of transactions and the actions of specific people who are statistically most likely to be linked to money laundering. These include certain customers that fall into high-risk categories or have been flagged for previous suspicious behavior, transactions from certain regions that are most frequently involved in money laundering, and any other transactions that seem questionable. Taking a proactive approach to identifying potential signs of money laundering early on can go a long way toward reducing damage.

3. Components of an AML Compliance Program 

An effective AML compliance program includes the following key components:

• Identity verification and risk profiling: Assess customer risk before establishing a business relationship.
• Ongoing account monitoring: Monitoring accounts over time is an important step in identifying questionable transactions, unusual spending patterns, or other potential problems as early as possible. Implement procedures to detect unusual transactions.
• Automated transaction monitoring systems: Use technology to flag suspicious activity.
• Timely reporting of suspicious activity: Ensure compliance by notifying regulators promptly.
• Annual AML training for employees: Money laundering techniques become more sophisticated and difficult to trace every year, which means that simply including AML training as part of new hire onboarding is not enough to protect your organization. Keep staff informed on evolving threats and regulations.