USING OBSOLETE OR INEFFECTIVE CIP AT CLIENT ONBOARDING CONSTITUTES COMPLIANCE MALPRACTICE

A large percentage of compliance officers, who act as gatekeepers at their bank during the Customer Identification Process (CIP) continue to employ platforms that are either obsolete, or have become largely ineffective against professional money launderers driven to create credible yet bogus profiles for themselves and their criminal clients. We have observed a resistance to updating CIP programs and systems on the part of compliance directors to minimize increasing costs, and thereby appear frugal to the executives at their bank. 

This is not only a major mistake, it falls short of banking best practices, and could later be determined to constitute compliance malpractice, of outdated platforms and procedures, resulting in significant money laundering operations are later discovered by law enforcement agencies investigating narcotics trafficking or serious financial crimes. Nobody remembers that you saved money in your compliance program when your banks is named as the unwitting facilitator of the placement of large sums of criminal profits into the global financial structure. In my personal opinion, there's nothing worse than the negative publicity of seeing your bank's name in the media as the place where money launderers recently arrested deposited their profits for years with impunity.

As a former career money launderer, I can tell you that laundrymen also operate a risk-based, albeit criminal, program. They collect their own form of intelligence about likely banking targets for their future operations, including but not limited to assessing the effectiveness of not only your compliance department staff but more importantly the CIP program that you are operating. If you have a team of inexperienced compliance officers running legacy platforms, they are going to quickly test the actual effectiveness of your system, and if they enjoy success, will soon drive major amounts of dirty money right through your bank. If your program interdicts a test operation, they will steer clear of your bank, and look elsewhere for one where the gatekeepers in compliance are ineffective.

Please understand that many money launderers have years of hands-on banking experience themselves; they have represented or worked for banks, and many keep constantly updated on technical development in the industry. If you are not running next generation CIP software, trying to be economical by refraining from acquiring advanced systems, as a cost cutting measure, you may end up paying the price, when your department's abject compliance failures end up with your replacement as director or supervisor of compliance operations. 

There is often a cost savings to updating your CIP, as your compliance staff can work smarter, and more effectively when they can access next generation systems, rather than your antiquated legacy platforms. You may not have to hire more frontline compliance officers is your present staff can discharge their gatekeeper duties and responsibilities faster and more efficiently. Just remember, your worthy opponents in the money laundering world are watching you. If you are cutting corners with CIP, it will come back to bite you.