Conduct risk in anti-money laundering: Implications of when financial institutions get it wrong

Heather Allen
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Heather Allen: First Vice President, BSA Officer, Peoples Bank North Carolina, USA

Journal of Financial Compliance, 2020, vol. 3, issue 4, 318-324

Abstract: The world of AML compliance is not traditionally viewed as a hotbed of potentially unmitigated customer conduct risk. The Federal Financial Institution Exam Council (FFIEC) BSA/AML Exam Manual contains a directive for examiners to review a bank’s policies, procedures and processes related to account closure. What the manual does not provide is any guidance on how this closure process should be handled. In reading this manual, it is apparent that this common AML practice affects more than the customer’s perceived AML risk exposure. In some cases, taking a conservative approach to AML risk management could unwittingly expose one to unrecognised customer conduct risk. This paper analyses the potential consequences to financial institutions when they fail to recognise and mitigate the customer conduct that is present throughout the customer lifecycle.

Keywords: customer conduct risk; AML; risk management (search for similar items in EconPapers)
JEL-codes: E5 G2 K2 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:aza:jfc000:y:2020:v:3:i:4:p:318-324

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