Sunday, August 9, 2015


Those who forget the lessons of history are bound to repeat them, the saying goes. In  2014, Bank of America paid a massive $16.6m civil penalty for AML sanctions violations, involving transactions with narcotics traffickers*. To add insult to injury, the bank reportedly knew about a screening defect, but failed to correct it for more than two years; No wonder the term egregious was applied to the case by OFAC.

This week, B of A's subsidiary, Bank of America Merrill Lynch, has announced that it is expanding its offshore wealth-management operation in Latin America, and is requiring that its clients must now have additional millions of dollars in their accounts by 2016, to qualify for its Private Banking & Investment Group. This is basically an order, to its client relationship representatives, to expand their customer base immediately in the region, which is high risk.

Such policies will result in extremely aggressive moves, by customer reps, to bring in new, high net worth clients, before the end of 2015; We call that sink or swim in my world.  In my experience with sales staff seeking to on board wealthy prospective clients, on a short deadline, their eagerness to succeed often trumps effective AML compliance. Sales staff may actively assist new clients in presenting a profile that is not quite accurate, has been embellished, or which even hides negative information. They will also seek to overrule valid compliance objections to specific clients, by appealing directly to senior management. This has been known to result in Source of Funds, and beneficial ownership, issues being not fully addressed before account opening.

Additionally, the reps are all located in the United States; how can they verify that the information and documents received from new, high net worth clients are not forgeries, altered, or bogus ? If they cannot visit the client's listed place of business, manufacturing facility, or offices, how do they validate KYC ?

Let us hope that B of A, remembering last year's debacle, gives BAML compliance staff sufficient authority to block customers who do not pass an objective KYC examination, just for the short-term goal of maximizing profits. Let's not have another major AML failure, because this time, given the heat that emanated from Congress, when the HSBC case failed to charge any individuals, heads could roll at BA, if it occurs again.

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