Bank Secrecy Act and Anti-Money Laundering Compliance

Q1.

I would recommend de-risking of third-party payment providers. De-risking of third-party entities such as foreign aid banks and organizations as well as private financial institutions helps in reducing money laundering habits and illegitimate business transactions. Third party payment providers may turn out to be disreputable merchants through charging of consumers’ questionable and fraudulent services and goods. They achieve this UDAAP through engaging in pressure and deceptive selling strategies such as telemarketing and misleading pop-up advertisements. These aspects qualify financial institutions from de-risking third party payment providers.

Q2

The following are steps that the US government should take to mitigate the risk of inappropriate customers accessing US based financial institutions:

  1. The government should tailor the risk management strategy. This approach is essential as it will help define customer types, geographical location, and channels of financial flow.  Through mapping of risks encountered in terms of customer types, financial institutions in the US can mitigate inappropriate customers from accessing financial institutions. For instance, the offshore trusts that are legitimate and legal should be exposed to the public through risk mappings (Fitzgibbon & Alecci, 2017). This would ensure that transparency of the trusts is exposed to public scrutiny for accountability and transparency.
  2. Silos should be eliminated to ensure crime rates in financial institutions reduce. Silos are crime scenarios such as money laundering, cyber-attacks, financing terrorist, and fraud. Banks in the US should focus on merging internal financial bodies who should fight crimes effectively, hence, preventing unjust customers from accessing the banks.
  3. The US government should address data challenges that are rampant in the banking industry of the United States.  It would be easy to address the issue of illegitimate customers through sourcing of high-quality and reliable databases that can detect any foreign and unwarranted transactions in the banking sector. The databases should also detect fake transactions that are carried out by dubious and corrupt financiers.
  4. Financial institutions in the US should actively engage data analysts. Data analysts are experts who can analyze information then advise financial institutions on steps to take to ensure transparency in transactions. This strategy will be effective for detecting and preventing growing threats in the financial institutions. Threats such as money laundering and fraud are rapidly rising in financial institutions, hence, engaging data analytics will be imperative in curbing these crimes.  Ethical issues are realized in compromised integrity, mistrust, dishonest, and compliance issues.

Q3.

Common Areas of Compliance Risk

  • Advertisement reviews: One of the reviews in the advertisement is the recommended controls. Control recommendations demand that financial institutions should not advertise misleading, inaccurate, or an advertisement that has a misrepresentation of its contract deposit. Moreover, an advertisement should not bear the name ‘profit’ to imply interest paid on an account. Additionally, an institution should not use terms such as ‘free’ incase maintenance or activity charge is imposed on an account (Regulation DD, n.d.).  In case an electronic advertisement exhibits an inciting term, a determination should be made on whether the advertisement is clear and conspicuous in referring a consumer to the location where more information is a required.
  • Disclosure Content Accuracy

Recommended Controls: The annual percentage precision in terms of yield is perceived as accurate if it is less than one-twentieth of one percentage point based on above or below the yield realized annually calculated according to DD regulations (Regulation DD, n.d.). Information and data disclosed should be accurate and clear the data users.

  • Evidencing Compliance with Disclosure requirements – content and delivery for in person and on-line account opening.

Recommended Controls: Disclosures should be outlined in a clear, accurate, and conspicuous way in writing and in a manner that a person possibly comprehends the information. Moreover, a recommendation is made on whether an institution provides an initial disclosure before a person opens an account or service provision undertaken (Regulation DD, n.d.). In case a person is absent during account opening or service is provided, the business should deliver or mail the disclosures not less than ten days after opening of the account or provision of a service.

Q4

Being a bank lobbyist, the two changes that I will make to the Unfair, Deceptive, Abusive or Acts and Practices (UDAAP) are:

  1. Setting high standards and developing a proper and well-defined control environment that includes strict policies and procedures to prevent fraud and other businesses that may compromise bank operations. This will help in eliminating operational risks that are encountered due to UDAAP.
  2. Improvise real-time and technological strategies of measuring, monitoring, and risk control that include UDAAP risks through the implementation of an effective and workable risk management system that best suits a bank’s size, complexity, and its risk profile. Banks often adapt simple strategies that expose them to UDAAP, thus implementing new strategies can help overcome challenges of fraud and deception.

As a consumer lobbyist, the changes I would suggest the banks to make include considering prioritizing protection strategies and favoring consumers in terms of service delivery. I will suggest changes to be made in the aspects of consumer protection from fraudsters since consumers play an important in the market by undertaking financial transactions with the banks. Moreover, consumers form an integral part of day-to-day businesses that are carried in the bank but unfortunately, they are vulnerable to deception, exploitative, and unfair acts from individuals within the banks or outside through cunning acts such as money laundering and deception in financial transactions.

References

Fitzgibbon, W., & Alecci, S. (2017). Paradise papers managed by millions for a carousel of millionaires and fraudsters. International Consortium of Investigative Journalists. Retrieved from https://www.icij.org/investigations/paradise-papers/paradise-papers-firm-managed-millions-carousel-millionaires-fraudsters/

Regulation DD. (n.d.). Trust savings. Retrieved from https://www.federalreserve.gov/boarddocs/caletters/2009/0914/09-14-attachment.pdf

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