Customizing AML and Risk Management Models for Small Institutions and MSBs – ACAMS 2106 Panel
A Risk Exposure Index (REI) is a mathematical tool, based on KPIs, used to determine if you’re managing risk appropriately. Unfortunately for small financial institutions and money service businesses (MSBs) – businesses that transmit and/or convert funds – they often don’t have the staff or resources to do this.
This was the focus of today’s panel at ACAMS 2016, “Customizing AML and Risk Management Models for Small Institutions and MSBs.”
As Anna Rentschler, CRCM, CAMS, vice president and BSA Officer, Central Bancompany, noted, small institutions and MSBs need to start by determining what is an acceptable level of risk for their institution. She reminded attendees that risk is inherently, “OK,” after all, that’s the very nature of lending. But the key, she noted, is for risk professionals to be in close contact with senior leadership at the institution to ensure AML compliance is in their view.
Sarah Beth Whetzel, CAMS, owner, Palmera Banking Solutions, said that the challenge for many small institutions is the thought that AML doesn’t belong in a technology meeting, but in reality, it does. Rentschler reassured the room that small institutions don’t need a high-technology solution to manage risk, but often it comes down to simple solutions that can appropriately manage risk and effectively integrate within the flow of business. She explained that small institutions often know their customers personally, so it can be easy to update customer information – their address, profession, etc. – and in turn, assess risk, when you speak with them.
As Anthony Rodriquez, CPA, CAMS, chief risk officer, AFEX, added, one of the best ways to incorporate AML mechanisms and processes is to evaluate customers when they enter the door. Jason Thibault, CAMS, vice president, BSA Officer, Compliance, Needham Bank, echoed this sentiment, and noted that the process of on-boarding customers should include assigning a risk score to each new customer. Digitalization of applications can help in managing data, but as he noted, small institutions are often resistant to moving away from paper processes.
Rentschler added that communicating with examiners is also key.
“Mom and pop” organizations, Rodriguez added, often engage in low-risk operations, and trust levels with examiners will improve if they can articulate their AML processes, and model what they are doing to change the perception that they may engaged in high-risk business.
Whetzel explained that modeling process is most effective when it is rooted in driving efficiency.