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AML Compliance, IG, and ESG: Not Just Alphabet Soup!


In 2023, Anti-Money Laundering fines reached a peak, notably with Binance Holdings Limited facing the largest penalty of $4 billion. The cryptocurrency exchange operator, along with its founder pleaded guilty to multiple violations, including breaches of the Bank Secrecy Act. In the gaming arena, Crown Resorts in Australia received a $450 million penalty from AUSTRAC for prior AML infractions, emphasizing the gaming sector's compliance importance. Also, Deutsche Bank incurred a $186 million fine from the US Federal Reserve for inadequate efforts in addressing money laundering controls. 


In the United States, the mandate for AML compliance programs is rooted in the Bank Secrecy Act (BSA), requiring financial institutions to formulate policies and procedures to detect suspicious activities and report them through Suspicious Activity Reports (SARs). The USA PATRIOT Act expanded the entities obligated to engage in suspicious activity reporting. Similar legislation exists globally, such as the United Kingdom's Money Laundering Regulations, the European Union's Anti-Money Laundering Directives, Canada's Proceeds of Crime Act, and frameworks in Australia, Singapore, and Hong Kong.


Effective AML compliance programs include internal controls, independent compliance testing, a BSA compliance officer, employee training, risk-based customer identification programs (CIP), and continuous customer due diligence (CDD).


AML compliance is also intricately tied to Environmental, Social, and Governance (ESG) success, addressing social responsibility and ethical business practices. Compliant AML programs help organizations achieve legal compliance, mitigate reputation risks, and enhance transparency, aligning with international collaboration principles.


And now to the good part…


Information Governance (IG) best practices play a significant role in promoting AML compliance controls. For instance, in records retention, multinational companies must be aware of varying AML record retention periods. Other considerations include Data Ethics Training, empowering the workforce to understand data-related decisions' implications, and Data Breach Response Training, ensuring a robust incident response plan.


Third-Party Data Sharing Policies and Auditing are critical ethical considerations, involving regular audits of supply chain compliance with data-sharing agreements, comprehensive reviews of agreements, and training personnel on restrictions and red flags. Regular monitoring of compliance with retention laws, including retention schedule requirements, is essential for a compliant AML strategy.


Put simply, organizations subject to AML compliance simply cannot afford to ignore information governance, and IG programs that promote a commitment to data quality, searchability, and defensible destruction must assume a central role in efforts to avoid liability!


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