It’s not every day that banking regulation is a major plot point in a television show so imagine my surprise when both bank capital regulations and currency transaction reports (CTRs) got a shout out in the first season of Netflix’s hit show Ozark.
Ozark tells the story of a seemingly mild-mannered financial advisor, played by Jason Bateman, who moves his family from Chicago to the Lake of the Ozarks, Missouri, to launder $8 million dollars for a drug cartel.
While plenty of TV shows and movies have plots focused on money laundering, it’s rare to come across a character with such a visibly deep knowledge of banking regulations. It made me think about a few things when it comes to Bank Secrecy Act (BSA) and anti-money laundering (AML) efforts.
1. Everything is not always as it seems. Jason Bateman’s character appears unremarkable to those around him. He drives an old Toyota and is known for his love of Consumer Reports and frugality. He’s the last person you’d suspect of financial crimes, yet there he is doing it. It’s a reminder that just because you think you know what’s going on doesn’t always mean that you do.
2. Criminals know banking regulations just as well as you do. The smartest criminals make a point of staying on top of the latest banking regulations. They know exactly what they can and can’t do to skirt the line of legality. Breaking the law to launder money is their business, and many go about it professionally and methodically.
3. Risk assessing cash-based business customers. Bateman is on a constant quest to find cash-based businesses through which to launder cash—everything from unsavory enterprises to religious institutions. Risk assessing customers and following customer due diligence (CDD) is a key step to knowing which customers have the most opportunity to exploit the banking system and pay extra attention to their actions.
Credit Union Staff Report BSA Shortcomings to Regulators
In other BSA news, The Wall Street Journal recently set industry tongues wagging with its report that Pentagon Federal Credit Union’s employees reported gaps in its anti-money laundering practices to executives and regulators. Among the alleged flaws were “understaffing, gaps in reporting of potentially suspicious transactions to the government, insufficient monitoring of wire transfers, a lack of anti-money-laundering training for senior leaders and inadequate scrutiny of potentially high-risk customers.” Employees wanted an increase in the BSA budget to keep pace with the growing credit union, The Wall Street Journal review of internal documents reported.
The credit union denies the allegations, saying that they were reviewed by “appropriate third-party authorities” and deemed untrue. Meanwhile, the credit union’s BSA program has improved since that time, including “reorganizing management, hiring more staff, adopting new policies and investing in suspicious-activity detection technology.”
What’s going on here? I’m not sure. Perhaps management at the growing institution had a long list of priorities and certain employees didn’t think BSA was getting enough attention. Maybe they didn’t agree with management’s BSA risk tolerance or approach. Or maybe they were just overzealous or difficult people. Regardless, it’s pretty rare to hear of a financial institution’s employees going over management and the board and straight to the regulators.
The lesson here: Always listen when employees raise issues with the effectiveness of BSA/AML or any other compliance program. Evaluate their input to determine if these are legitimate issues that require attention (and often they are) or if the employee’s interpretation of how things should be done are consistent with guidance, best practices and the institution’s risk tolerance. In the best-case scenario, they will help you refine your institution’s programs to make it more effective and efficient. And if you discover their concerns are unfounded, you’ll have documentation to show regulators that you took the concerns seriously.
So, what have we learned?
1. Take employee feedback on compliance procedures seriously.
2. Money launderers do their best to blend in.
3. There’s always money in the banana stand.