The Expanded Expectations of Corporate Governance in BSA/AML and the Impact on the Audit Function

Author: Kathe M. Dunne, CAMS-Audit

Most financial industry observers and participants agree that regulatory review of the Bank Secrecy/ anti-money laundering (BSA/AML) compliance function in depository financial institutions increased significantly immediately following the passage of the USA PATRIOT Act in 2001. It took several years for specific regulatory guidance to catch up to the law in the form of the Federal Financial Institutions Examination Council (FFIEC) BSA/AML Examination Manual. Until recently, depository financial institutions have done reasonably well auditing the (BSA/AML) program using this manual as a primary reference.

Significant and blatant BSA/AML violations have been discovered over the past three years (e.g., the masking of certain transactions and the rerouting of payments to prevent detection) that resulted in an uproar in the public sector calling for action on the part of the government. The public wants to know “Who is to blame?” and “Who will pay?” for these infractions. These significant violations have resulted in large fines for the involved institutions, but with limited accountability assigned to the management of the institutions.

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