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An Interpretative View of Pertinent Legislation

1970 — Bank Secrecy Act. The US Government (USG) requires banks to report cash transactions over $10,000; identify conductors; and maintain records. The purpose of this was to aid the USG in identifying the source, volume, and movement of currency by potential targets or networks of interest (mainly those that may be tied to the War on Drugs).

What is a conflict model?

Conflict models are often the result of conflict perspective. When individuals or entities interact in an effort to cooperate fundamental alignments must be forged in order to produce desired outcomes. However, when alignments are off, friction or natural conflict ensues. We are familiar with this theory throughout many aspects of society and systems.

Conflict #1 — Too many interested entities.

This origin of conflict is purely based on the amount of people that must come together to achieve a well organized and optimized regime aimed at combatting financial crime.

Conflict #2 — Finding a common view of the objective.

This should be easier to align amongst the various elements of the USG. However, while Treasury takes the lead on a national strategy and incorporates the national level policy view point it often seems disconnected with the operational components spread across the law enforcement, intelligence, and defense communities. Sprinkle in the regulators — who only have authorities as applied to supervision are naturally misaligned based on their inward focus alone.

Conflict #3 — The rise of the regulator.

Most people in this space would say that everything that is being done is being done for one reason — appeasement of the regulators. This brings us back to those very critical inflection points in the legislative history. What began as a very objective information flow between two parties (if X happens, do Y) has evolved into a very subjective multi-pronged mechanism that grows further away from that flow. In the case of the regulator and their rise — you have to consider how bad policies have driven overly complicated rule requirements; bizarre examination procedures; and a carrot/stick (minus the carrot) relationship between a third party and the burdened industry elements.

Conflict #4 — Information sharing falls short to make a difference.

Information holds value. In many instances lack of trust or red tape can block or significantly lag information sharing. Speculation and uncertainty can result in distrust and often results in poor outcomes. The regulators also play a role in disrupting good information sharing. The perception of regulatory risk often prevents management from being fully transparent with law enforcement partners without their regulator’s blessing.

Conflict #5 — Domain isolation misses the big picture completely.

90% of the people that operate within specific “domains” of this regime only comprehend or care to understand the procedural aspects of their domain. It is a monumental challenge to get policymakers to view the landscape as operators do; for regulators to view the landscape as industry does; and so on. Domain isolation may be the top risk to the further disjoining of the U.S. AML Regime. Pressure (mainly from regulators on industry) is the predominate cause of domain isolation persistence.

 

Thought Leadership Series
An Article by Vic Maculaitis, CAMS
Founder & Chief Executive at THE DATA INITIATIVE

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