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New York Law Adds Teeth to Federal AML Oversight
[Photo: compliancemonitor.com]
A rule implemented by the New York State Department of Financial Services that took effect on January 1 will add teeth to federal statutes requiring financial institutions to validate their anti-money laundering compliance programs. The state law covers certain financial institutions registered or doing business in New York, and requires not only that they certify their AML transactions monitoring and screening programs, but that the CFO sign a document stating the programs comply with all federal statutes. A false filing could lead to a financial and criminal penalty on the institution - and on the certifying officer.
“That’s putting a lot of teeth into the existing set of regulations. If I am certifying in blood and putting my name on a document, and I now have personal liability, I am going to be much more cautious and make sure it is doing what I expect it to do.” - - Joe Cataldo, head of AML and model management at Sionic Advisors.
[This is the same as in the early 2000’s when, under Section 302 of Sarbanes-Oxley, principal executives and financial officers had to ‘attest’ to the adequacy of their firm’s internal control procedures.]
For those institutions looking to adhere to the law’s reporting date of April 2018, that means defining and documenting the roles and responsibilities for who is responsible for doing what, maintaining risk-based evidence for all decisions that are made, making sure that models are mapped to the actual risks the bank faces, and that there is an understanding of where gaps are, said Mr. Cataldo.
Another issue is whether to self-disclose any gaps or problems before April 2018 and whether to do so even if there is no remediation plan in place. “The best practice is to get it out, but typically banks don’t feel like getting things out until their ducks are in a row and they can say ‘We have a problem, here’s what we are doing to remedy it and when,’” said Mr. Cataldo. “The hesitation comes if they have to say ‘I have a problem’ and not have their ducks in a row.”
