In the last few years we have lived in the era in which governments around the world cite media leaks as justification for clampdowns on non-compliance, fraud and money laundering. Bankers around the world are expecting the same to happen in the wake of the FinCEN files, according to a survey by the Association of Certified Anti-Money Laundering Specialists.

The world of SARs

The survey asked the question: Which of the following, if any, do you believe is most likely to be the result of the suspicious activity/transaction reporting leaks cited by the FinCEN Files?

Out of all of them, 31% expected regulators to increase their scrutiny of financial institutions. 25% expected an increase in defensive suspicious activity/transaction reports. 15% expected financial institutions to strengthen their AFC/AML programmes voluntarily. 11% expected no change as plenty of progress was already being made.

The so-called ‘FinCEN files’ identify US$2 trillion in suspicious transactions, although the entire cache contains less than 0.02% of the 12 million or more SARs that financial institutions sent off to FinCEN and other law-enforcement agencies between 2011 and 2017. Several agencies of the United Nations (UNODC, UNCTAD and the UN Secretary Generalship, among others) have estimated that the global illegal economy steals between $2-4 trillion annually — the equivalent of nearly 2.7% of all goods and services produced in the world — but that Governments detect less than 1% of the world’s dirty money and actually confiscate 0.02%.

Indeed, leaks of SARs were the thing that respondents the most. ACAMS asked them: "When thinking about the potential leak of suspicious activity/transaction reports filed by your institution or citing your institution, how concerned are you, if at all, about each of the following?" In the case of reputational harm caused by news reports, 69% were concerned, 17% were somewhat concerned and 14% were not concerned at all. Loss of trust among clients was second, the figures being 61%, 18% and 21%. The endangerment of compliance staff involved with the filing of a SAR came third, with 59%, 19% and 22%.

On the point of additional scrutiny from regulators or law-enforcement officials, 56% were concerned, 23% were somewhat concerned and 22% were not concerned. Roughly the same was the case for the effect on law enforcers' investigations and litigation arising from the leaks.

Respondents to the survey - both institutions and practitioners - came from North America (roughly half); Europe (16-9%); the Middle East (6-7%); Asia (14-17%); Africa (6%); and elsewhere. Nearly three-quarters of them - 71% - were financial institutions, with a smattering of legal, FinTech, RegTech and governmental people also.

The effectiveness of fines

Half of respondents believed that monetary penalties for institutions were only effective as a deterrent to repeated compliance failures in limited instances. 23% believed that they were generally effective as a stand-alone deterrent, 51% believed that they were effective as a deterrent only in limited instances, 17% thought that they were generally ineffective as a stand-alone deterrent, and 8% did not know.

The effectiveness of SARs

According to FinCEN, one potential requirement of an effective AML programme is that it ought to “provide information with a high degree of usefulness to government authorities.” The survey asked the banks and practitioners how confident they were that they currently reported information with a “high degree of usefulness” 50% were very confident, 42% were somewhat confident and 8% were not confident at all.

Keeping a suspect's account open

In instances when law-enforcement investigators ask institutions to “keep open” accounts or relationships in order to monitor the progress of suspicious activity, they cause a great deal of worry at those institutions. Their primary worries, as before, were reputational harm resulting from bad press (33%); a lack of clarity about the expectations of law enforcers (23%); regulatory problems that might arise (17%); and the possibility of litigation springing from the activity in the future (11%).

The time-lag

About two-thirds (63%) of respondents thought that there was a reporting time-lag which limited the effectiveness of SAR regimes. This is the time between a suspicious transaction occurring and it being ultimately reported to the authorities.

Predicate crimes

ACAMS asked people the question: "How important, if at all, are each of the following risk considerations when developing your AML/CTF programme?"

This is, in truth, a question about predicate crimes and the likelihood of them being behind any laundering or terrorist-financing schemes that compliance officers and money-laundering reporting officers might encounter.

87% of the respondents thought that third-party money launderers were important; 9% thought that they were somewhat important; and 4% thought that they were unimportant. For drug trafficking the figures were 86%, 10% and 4%. For terrorist financing the figures were 85%, 11% and 5%. For sanctions evasion they were 83%, 11% and 5%. For cybercrime, fraud (healthcare, elders, romance and Covid-19), corruption, people trafficking and tax evasion they were roughly the same. For proliferation financing/weapons of mass destruction they were 70%, 20% and 10% and for wildlife trafficking they were 52%, 29% and 20%.