Regulators Continue Focusing on Anti-Money Laundering Violations

Recent settlements continue to show how regulators are cracking down on Anti-Money Laundering (“AML”) violators of all shapes and sizes.  This week HSBC, Europe’s largest bank by market value, agreed to a settlement after facing accusations it transferred funds through the U.S. from Mexican drug cartels and on behalf of nations such as Iran that are under international sanctions.  The settlement – $1.9 billion, or 9% of the company’s 2012 profits, is the largest penalty ever imposed on a bank.  Additionally, another British Bank – Standard Chartered PLC, signed an agreement with New York regulators this week for $340 million to settle a money-laundering investigation involving transactions it undertook with funds from Iran. Pursuant to the Bank Secrecy Act (“BSA”) and the USA Patriot Act (“Patriot Act”), many financial services firms are required to institute AML programs in order to detect and help prevent money laundering.  It is necessary for these firms to identify each client, conduct a thorough evaluation by gathering important information and documentation and then making a determination of whether or not the client seems legitimate. This process occurs before engaging in any business practices with the client and therefore avoids “willful blindness” issues. While organizations such as The Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) have recently revealed they are working on a proposed rule that would require investment advisers to implement AML compliance programs; currently the Investment Adviser’s Act of 1940 does not require investment advisers to establish such programs.  However, with recent trends in regulation, investment advisers would be wise to consider their fiduciary duty and develop the following:

  • A systemic process for reviewing of all incoming accounts, including a customer identification program, to ensure compliance with AML regulations;
  • Designation of an AML Officer who is responsible for daily coordination of AML compliance;
  • Mandatory annual training for personnel; and
  • Independent annual testing of AML compliance

For additional information about anti-money laundering laws and regulation, or any other compliance concern, please contact us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or (619) 298-2880.

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