COMMUNITY BANKS AT INCREASED RISK FROM MONEY LAUNDERERS DUE TO INCREASED AML/CFT AT LARGE, REGIONAL FINANCIAL INSTITUTIONS

As a money launderer for more than a decade, I always followed what we call the Path of Least Resistance, when it came to targeting financial institutions.That means, whenever AML compliance became more efficient in one sector of the financial world, I moved on to areas where there still existed major gaps. Given that large American banks have now spent a considerable amount of time, and their budgets, in crafting compliance programs that are not only effective, but are continually upgrading their systems, you can expect that local and community banks are in the laundrymens' sights, as vulnerable targets.

Where's why:
1. Budgets in community banks are typically small on training, with a major portion being conducted in-house to save money. Advanced money laundering techniques and methods, especially tradecraft that has become known to be in use of late, are not taught, and therefore frontline compliance officers are unaware of obscure and esoteric methods, and ignore their indicia when seeing them during Transaction Monitoring.

2. The typical salaries of compliance officers at local and community banks are rarely at the level that they are at major financial institutions. Therefore, the best, and most capable & experienced, talent goes elsewhere. Until and unless this changes, community banks will not attract those compliance officers who can identify & interdict, in real-time, advanced money laundering operations passing fund through the bank.

3. The latest, and most effective, software platforms and programs available in the industry, are often not adopted for a extended period of time, due to a lack of funds in the current annual compliance budget. There must be a contingency fund available, should new technology appear, so that it is purchased the same year it becomes available.

It is humbly suggested that leadership at local and community banks set aside sufficient budgets to teach their staff advanced AML/CFT techniques, with external training, and pay them a competitive salary. Failing that, expect to see further penetration by money launderers who know a golden opportunity when they see it. You also must keep completely current on emerging software tools, as they appear. Expand your budget to meet these challenges, even if it means to reduce distribution of profits to shareholders. Otherwise, expect to get hit by money launderers, with the resultant negative publicity, regulatory fines and penalties, and impact upon your customer base.