Too Good to be True, Anti-Money Laundering September 30, 2013 by Allan Ramlall Leave a Comment

Allan Ramlall Anti-Money Laundering Report: It was reported last week on September 24, 2013 in numerous reports about a $8.2 million federal penalty charge against Saddle River Valley Bank in New Jersey for 2009 through April 2011 anti-money laundering compliance (AML compliance) violations when it processed $1.5 billion of inadequately monitored transactions for Mexican and Dominican foreign exchange firms. I would like to extract one quotation which I believe has not just serious implications for banks but for any financial organization whether it is a precious metals dealer, remittance company, credit union or a foreign exchange house. And please do note that I am not here to judge the attributes or negatives on any law or regulation. I am just basically stating the regulations as it exists and how it will and does affect any financial oriented institution. According to a Reuters article U.S punishes N.J Bank for Money laundering violations on September 25, 2013 one quotation states Its pretty remarkable that a small community bank in suburban New Jersey was attracting more than a billion dollars in transactions with customers in Mexico and the Dominican Republic, and nobody thought it was too good to be true, FinCEN Director Jennifer Shasky Calvery said in a statement. There is a wealth of information provided for banks regarding their responsibilities for Bank Secrecy Act (BSA) and Anti-Money Laundering (AML). In the case of Saddle River Valley Bank, it clearly should have identified and fully comprehend all facets of their new product/service in which it was obviously entering. And, the U.S Treasury has quite publicly announced that casa de cambios business originating from Mexico was in a high risk status. And most of all, it is true that the management should have answered the question as to why would such high volume foreign exchange business would be coming to a small community bank in N.J . Let us say for argument sake that the bank did clearly and fully understand this new business and it was willing to have a justification for the Mexican and Dominican business approaching the bank. Then the next logical step would be to define all of the money laundering and financing of terrorism risks in this new business category so as to determine if it had the personnel, internal systems and resources to mitigate all of the identified risks. Simply put, the bank should have made a determination if it had the

appropriate policies, procedures and processes to monitor and control all of those money laundering and terrorist financing risks. Obviously Saddle River Bank did not have a proper and acceptable Risk Assessment because ultimately the Regulators imposed a fine on the bank. Most likely the management of the bank was highly ethical but perhaps was improperly advised to enter an obviously lucrative business but not pursuing a wise due diligence process. And I am so surprised that a required Independent Review did not determine that the bank was not prepared for an audit/review by the Examiners for BSA/AML and Office for Foreign Assets Control measures. Again, we see in the current regulatory environment that compliance has to be a component in the business development strategy. The compliance advice could prohibit or limit a new line of business but the positive effect is at least the institution would not have to face the consequences such as Saddle River Valley Bank on unsustainable fines. And on the other hand, the compliance advice could give an approval of a new business line but at least with proper regulatory defenses then there is a higher likelihood of success.- Allan Ramlall