1. AML Laws

Federal anti-money laundering (“AML”) laws are complex in nature and apply to a broad category of institutions and businesses. One of the most important AML laws is the Bank Secrecy Act, which obligates financial institutions to have in place policies and procedures that identify and prevent instances of money laundering. These laws are increasingly utilized by federal agencies to target both individuals and entities for engaging in various AML violations and crimes. In addition to violating federal AML statues, federal agencies are also keen on going after companies who fail to maintain effective AML compliance policies, which can lead to significant penalties.

Because of this, proper AML compliance is a top priority for financial institutions, brokerage firms, and other entities. If AML compliance becomes an issue, these entities must be prepared on how to defend themselves during an investigation or when federal charges are filed. Retaining an attorney experienced in AML compliance and defense is the best protection an entity can take to protect their interests when the federal government comes knocking.

2. Who Investigates AML Violations and Who is Subject to AML Measures?

The federal government considers AML violations to be serious crimes. Many federal and local agencies are involved in its investigation and prosecution. The local U.S. Attorney’s offices are typically the first to initiate an investigation for AML violations, along with the Department of Justice (“DOJ”). Other federal agencies that may be involved include the Federal Bureau of Investigation (“FBI”), the Securities and Exchange Commission (“SEC”), the Commodity Futures Trading Commission (“CFTC”), and the Internal Revenue Service’s (“IRS”) Criminal Investigation Division.

Both natural and legal persons are subject to AML measures and can both, therefore, be investigated and prosecuted for violating AML statutes. Examples of institutions and persons subject to AML measures include the following: financial and depository institutions, including banks and credit unions; mutual funds; money services businesses; brokers and dealers under the federal securities laws; insurance companies; and other entities that are subject to AML obligations.

3. How to Maintain Compliance with AML Laws

There are numerous AML statutes, including the Bank Secrecy Act of 1970 (“BSA”); the Money Laundering Control Act (1986); and the Annunzio-Wylie Anti-Money Laundering Act (1992) as well as the PATRIOT Act. AML compliance obligations are convoluted and can differ depending on the specific circumstances of your company such as your industry sector or whether you do business with foreign entities. Despite the specific differences, there are generally five steps to take to establish and maintain compliance with the various U.S. AML statutes.

• Adopt an AML Compliance Program. All businesses that are subject to AML laws must adopt a company-wide compliance program. The compliance program must be tailored to the specific needs, operations, regulatory environment, risk profile, and industry of the company at issue. Its goal is to be proactive as opposed to reactive. An effective compliance program identifies internal weakness within the company—such as instances of fraud, deceit, misconduct, or other violations—and aims to correct these weaknesses as soon as possible. The following are key characteristics of an effective AML compliance policy: policies and procedures on documentation and monitoring; effective action plan to prevent, detect, and report suspicious activity; anti-retaliation policy; periodic internal reviews and updates; annual training for personnel; auditing and enforcement; independent review of compliance program.
• AML Due Diligence Procedures. Maintaining continuous AML due diligence is critical for compliance, especially for financial institutions and brokerage firms. AML due diligence involves the adoption of policies and procedures that are reasonably designed to identify and report suspected instances of money laundering. It is important to adopt policies and procedures that are specific to the business’ needs and obligations.
• Active Suspicious Activity Reporting. Suspicious activity reporting is a process whereby a financial institution generates a report when certain suspicious activity comes to light. It is an important part of AML compliance and helps an entity detect potential money laundering schemes or violations of the BSA.
• Adopt Customer Identification Programs. Financial institutions and brokerage firms are required under Section 5328(l) of the BSA and 31 CFR §1026.220 to adopt “know your customer” (“KYC”) programs. These KYC programs help entities form a reasonable belief as to the veracity of their customers' identities. It is an important compliance identity verification and enables entities to know the identities of their customers prior to doing business with them as well as to assess the overall risk of the customer.
• Continuous Monitoring and Enforcement. An important part of AML compliance is to maintain effective monitoring and enforcement policies within the company on a consistent basis. For instance, many companies find it useful to conduct internal audits or to retain an outside auditor to conduct an independent audit.

4. Examples of AML Issues Your Attorney Can Assist You With

An attorney experienced in AML compliance and defense will be able to assist you with a host of AML issues, whether involving reporting, disclosure, and federal charges and defense. Below are selected examples:

• Developing an effective AML compliance program for financial institutions, brokerage firms, and other entities;
• Providing legal advice on an entity’s AML due diligence or the effectiveness of its internal controls;
• Reviewing and providing advice on a company’s offshore transactions or transactions involving foreign parties;
• Reviewing clients’ recordkeeping of transactions and reporting of suspicious activity reports;
• Guiding clients through the reporting obligations under the Bank Secrecy Act;
• Counseling clients on the applicability of AML statutes and other relevant statutes to the client’s case.

In many cases, it is possible to avoid the negative consequences associated with a protracted investigation or prosecution. If you have been charged with AML violations, it is best to first and foremost retain an experienced federal attorney in AML compliance and defense. An attorney can help you resolve your AML investigation before they turn into federal charges.

“Those being investigated for money laundering violations or for failing to maintain effective AML compliance can be subject to significant sanctions, including criminal and civil fines, imprisonment, disgorgement of ill-gotten gains, injunctions, and irreparable reputational harm. Certain entities such as financial institutions are subject to even greater AML requirements and their failure to adhere to such requirements could lead to more stringent Treasury Department restrictions. Therefore, it is critical to secure the assistance of an AML Compliance and Defense Attorney to mitigate the adverse effects of an investigation and prosecution and reduce your liability exposure.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

5. AML: Now What?

AML laws are complex and apply to a broad range of institutions and entities. In order to ensure that one’s business is adhering to all the AML laws and requirements, AML compliance programs are put in place to identify, report, and prevent these violations. AML compliance programs can help entities ensure that their business is compliant with federal law. But these compliance programs must be designed in an effective and robust manner such as by including provisions addressing company-wide compliance, due diligence, regular suspicious activity reporting, KYC programs, and effective monitoring and enforcement policies. When facing an AML investigation or prosecution, it is important to retain the legal services of defense counsel as soon as possible. Your counsel can immediately start preparing your personalized defense strategy to combat federal charges and limit liability and risk exposure.