Considerations for financial institutions looking to re-approach their AML compliance programs

FinCEN files

By Vanessa Malone

Last week, the Financial Crimes Enforcement Network (FinCEN) announced a plan to make significant reforms to the U.S. anti money laundering system.

Coincidentally this announcement came just days before the release of the “FinCEN Files,” a culmination of a 16-month long investigation led by BuzzFeed News and the International Consortium of Investigative Journalists (ICIJ) which revealed that major banks have continued to process payments identified as being at high risk of money laundering and other crimes.

The investigation analyzed more than 2,000 leaked Suspicious Activity Reports (SARs) filed with FinCEN between 1999 and 2017 and leveraged investigative journalists from more than 100 news organizations in 88 countries.

Although the leaked SARs only represent suspicious activity and not actual crime, they put into question $2 trillion in transactions from global banks including Deutsche Bank, Bank of New York Mellon, Standard Chartered, JPMorgan and HSBC.

You can read more about the detailed findings here. What we want to specifically address in this week’s blog are the glaring issues the FinCEN Files have identified with the current system and the urgency it’s created for financial institutions to re-approach their own AML compliance programs. 

Current AML compliance requirements

Currently, a financial institution’s compliance with the Bank Secrecy Ac and other anti-money laundering requirements is reviewed under FINRA Rule 3310, which sets forth minimum standards for a firm’s written AML compliance program.

A repeated phrase in the standards is that a compliance program must be “reasonably designed.” This loose language was purposeful as regulators wanted to ensure that firms would do everything in their power to create stringent anti-money laundering compliance programs, rather than doing just the bare minimum outlined with set standards.

What the FinCEN files investigation highlights is that this framework is not working, to put it lightly. 

AML compliance red flags

Although billions are spent on compliance each year, documents in the FinCEN Files show compliance workers at major banks resorting to basic Google searches to attempt to learn who’s behind transfers involving hundreds of millions of dollars.

This inefficient method leads to instances where banks are filing SARs long after a transaction takes place and only after a client in question becomes identified in a news article or other separate inquiry.

In half of the SARs in the FinCEN files, banks didn’t have information about one or more entities behind the transactions and major financial institutions often failed to perform the most basic checks on their customers, such as verifying where a business is located when someone opens a new account. 

It’s not just the banks at fault here. These critical failures allude to a problem with the entire money laundering defense system.

According to the FinCEN File’s analysis, FinCEN received more than 2 million SARs last year. Despite these reports nearly doubling over the past decade, FinCEN’s staff shrunk by more than 10%, with sources saying that most SARs aren’t even read. 

Further, the United Nations Office on Drugs and Crime indicates that less than 1% of the world’s dirty money is detected by authorities.

Without clear measures to quantify how effective a firm’s compliance program is and the support to take equally effective disciplinary action when these measures aren’t met, this global problem will not get solved.

Where does AML compliance go from here

We believe that the findings from the FinCEN Files will create a massive response from regulators to update compliance requirements and for banks to bulk up their compliance programs.

Bank stocks already took a beating on Monday following the FinCEN File’s release and many of the banks in question have put out statements highlighting their commitment to anti-money laundering and all compliance laws.

If we’re treating FinCEN’s latest announcement as an initial response to the findings of the FinCEN Files, then we can infer that there will be significant changes to the current AML compliance requirements.

FinCEN stated plans to redefine what an “effective and reasonably designed” AML compliance program entails. We can assume that the subjective language surrounding the standards will be replaced with clear, objective standards.

FinCEN is explicitly requesting comments and concerns from industry leaders, which could represent an opportunity for money laundering’s main line of defense to come up with a joint solution.


The leaked SARs only make up less than 0.02% of the more than 12 million suspicious activity reports that financial institutions filed with FinCEN between 2011 and 2017.

This means these findings could represent the tip of an iceberg for how outdated the anti-money laundering system is. If major institutions are having trouble combating money laundering, how are small firms doing? This report is a great wake up call for financial institutions, small and large, to take a critical look at their current AML compliance structure in place and proactively make the necessary changes.

Horizon’s AML compliance solution

Horizon’s AML screening technology, AMLCop, offers firms a turn-key AML compliance solution for firms to continually streamline the verification of user details against a proprietary database of global sanctions, Politically Exposed Persons (PEPs), and watchlists.

Additional features include timestamped records of when someone is cleared and who cleared them for internal record keeping and compliance; standardized risk management reporting; and secure data storage to protect your client’s sensitive information.

More than ever, firms must be diligent in building or adapting their anti-money laundering compliance programs to effectively combat fraud. Horizon’s AML software is a timely solution built to enhance your AML compliance program from the very beginning and keep up with the evolving regulatory requirements.

To schedule a demo for Horizon’s anti-money laundering screening solution, AMLCop, please visit Please view our AMLCop E-brochure here.

About Horizon

Horizon offers a suite of integrated securities software applications for compliant issuance through secondary trading of electronic securities. Truly a compliance-first business, our solutions combine Wall Street and Silicon Valley to power the next generation of exchanges and securities offerings in the U.S. and globally. Visit us at

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