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Are Anti-Money Laundering Regulations And Red Tape Reaching Critical Mass?

By Phillip Silitschanu

In recent years, Anti-Money Laundering (AML) regulation has proliferated. Wherever you do business, rules are complex and penalties for violation can be harsh. Many people think that the regulatory environment is desperately in need of reform.

The UK Scenario: A Tangled Mess Of Regulation


You know AML regulations are becoming too onerous when even the United Kingdom's Business Secretary, Sajid Javid, states that the time has come for a review of AML rules. In August 2015, Mr. Javid said that "this new review is about making sure the rules we have to protect our strong financial services industry from abuse are not unintentionally holding back new and existing British business.1" While Mr. Javid's efforts are a promising first step, it will take years to rein in out-of-control red tape and streamline foreign currency exchange transactions.


U.S. AML Rules: Complex And Draconian


Meanwhile, AML prosecutions in the United States are charging ahead full steam, with no signs of abating. In one case, the Financial Industry Regulatory Authority (FINRA) fined a U.S. custodian bank $8M USD and suspended its global AML compliance officer for a month over failures in detecting suspicious currency exchange transactions. And in December 2014, a major U.S. retail and commercial bank was ordered to pay a $1.5M USD fine for failing to verify new accounts.2


AML rules in the United States, which grew out of the Currency and Foreign Transactions Reporting Act of 1970 (commonly referred to as the Bank Secrecy Act), set strict requirements for the reporting and recordkeeping of foreign financial agency transactions, the filing of reports on foreign currency exchange transactions, and reporting of exporting and importing monetary instruments. These laws have been augmented by the Anti-Drug Abuse Act of 1986, and further complicated by the Patriot Act of 2001.


For foreign institutions transacting business in USD, the burden of regulation can be increased by the need to comply with U.S. AML laws as well as those in their own jurisdictions.


AML In Asia: From One Extreme To Another


Yet, Asia faces an unique set of problems when tackling money laundering and illegal financial foreign currency exchange activities. Many of the emerging countries in Asia face economic instability, corruption, and weak enforcement of laws.


Asian governments and regulators have been busy: adopting standards set by the Financial Action Task Force (FATF), buttressing AML laws, and working to coordinate operations with neighbouring countries. The FATF is a group of 36 countries who have pledged their commitment to 40 AML principles to prevent violations in foreign currency exchange transactions.


While the principles are noble, the execution of those principles has been spotty thus far. Countries in Asia have wildly varying levels of resources available to commit to AML enforcement: while Singapore has been rated as being approximately 90 percent compliant with the FATF recommendations, Vietnam has been rated as being approximately 90 percent not compliant. In between those two extremes lie the rest of the countries in Asia.


How AML Governance Affects You


But, you may ask, why should all these AML rules be of any concern to me? They apply to “financial institutions." Yes, that is true. However, the definition of a “financial institution" is incredibly broad—broad enough to include a person dealing in precious metals, stones, or jewels; or a pawnbroker; a business engaged in vehicle sales (including cars, planes, and boats); a person involved in real estate; and even travel agents. This list is certainly long enough to exhaust anyone attempting to prevent themselves from running afoul of AML laws.




It would appear that until AML laws are streamlined and simplified, it is advisable to tread carefully when effecting international currency transfers, lest the inconvenience of red tape turn into the nightmare of criminal violations. Using a secure overseas payments service, from a trusted institution, can help ensure that your business does not violate the multitude of AML laws, no matter which country's borders your currency is crossing. American Express has dealt with foreign currency exchange for over a century and has a long history of providing secure and compliant payment services, both by wire transfer and now by Amex card through its Accessline product.

Phillip Silitschanu

The Author

Phillip Silitschanu

Phillip Silitschanu is the founder of Lightship Strategies Consulting LLC, and CustomWhitePapers.com. Phillip has nearly 20 years as a thought leader and strategy consultant in global capital markets and financial services, and has authored numerous market analysis reports, as well as co-authoring Multi-Manager Funds: Long Only Strategies. He has also been quoted in the US Financial Times, The Wall Street Journal, Barron's, BusinessWeek, CNBC, and numerous other publications. Phillip holds a B.S. in finance from Boston University, a J.D. in law from Stetson University College of Law, and an M.B.A. from Babson College.


1 Ministers seek to cut red tape UK anti-money laundering regime, George Parker, Financial Times, August 28, 2015.
2 FINRA probes Merrill over anti-money laundering compliance, Brett Wolf, Business Insider, August 19, 2015.

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