Throughout the entirety of cartoonist Charles M. Schulz’s “Peanuts” comic strip, the main character, Charlie Brown, repeatedly falls prey to the same antics of classmate Lucy van Pelt. Over and over, Lucy tells Charlie that she will hold a football still for him so he can kick it, only to pull the ball away at the last second. Despite falling for this same false promise in 37 cartoon strips, four episodes of “The Charlie Brown and Snoopy Show” and 11 animated specials, Charlie never learned his lesson.When it comes to the banking industry’s anti-money laundering (AML) efforts amid heightened regulatory oversight, regulators are making sure that financial institutions have adequate motivation to learn quickly from the mistakes of their peers. According to the United Nations Office on Drugs and Crime, in 2024, money laundering represented anywhere from $2.22T to $5.54T of the money flowing through financial institutions, accounting for up to 5% of global GDP. As criminals become ever more sophisticated and aggressive in their money laundering efforts, including embracing newer avenues such as cryptocurrency, regulators are stepping up their oversight of financial institutions’ AML initiatives. Those who fall short are being held accountable. Tough Lessons for TD BankA Justice Department investigation into money laundering and violations of the Bank Secrecy Act within TD Bank revealed significant shortfalls in TD Bank’s AML compliance initiatives. Between 2015 and 2020, these insufficiencies had enabled organized crime rings to pass hundreds of millions of dollars through the financial institution, particularly from sales of illicit drugs, including fentanyl. The bank failed to detect this activity because of insufficient Know Your Customer processes, ineffective monitoring of suspicious transactions, poor controls within the organization, and inadequate training of employees about AML issues. As a result, TD Bank was charged for its failure to operate an AML program compliant with the Bank Secrecy Act and to accurately report currency transactions. The institution was hit with $3B in penalties, and it recently became the first US financial institution forced to plead guilty to conspiring to commit money laundering. In addition, investors have filed a class action lawsuit against the organization for intentionally misleading them about the extent of its failures on this front.
Ongoing Investigations at Bank of AmericaBank of America has also found itself within regulators’ crosshairs. The institution recently acknowledged that regulators are looking into the adequacy of its AML efforts and economic sanctions program, which it listed among risks in its second quarter filing. In particular, regulators have flagged concerns regarding Bank of America’s monitoring of transactions, governance, training, and customer due diligence. The Consumer Financial Protection Bureau is also digging into the organization’s handling of payments made through Zelle. Future Outlook and AML Best PracticesAmong the biggest problems faced by both Bank of America and TD Bank are outdated policies and processes, insufficient training of employees, and inadequate resources devoted to AML initiatives — things that community financial institutions should keep in mind when looking at their own AML processes. Since many smaller financial institutions rely on legacy systems, it is important to ensure that AML monitoring is sufficient, as criminals are aware of the ease of getting around outdated policies and rules. A healthy balance between automated technology oversight for tasks such as onboarding and day-to-day monitoring coupled with active oversight by well-trained employees is critical. It is equally important to ensure that employees throughout your entire organization are kept up to date on common AML tactics among criminals and the red flags to look for, as well as the things regulators are watching for. Key areas to strengthen your institution's AML initiatives:
Ongoing Investigations at Bank of AmericaBank of America has also found itself within regulators’ crosshairs. The institution recently acknowledged that regulators are looking into the adequacy of its AML efforts and economic sanctions program, which it listed among risks in its second quarter filing. In particular, regulators have flagged concerns regarding Bank of America’s monitoring of transactions, governance, training, and customer due diligence. The Consumer Financial Protection Bureau is also digging into the organization’s handling of payments made through Zelle. Future Outlook and AML Best PracticesAmong the biggest problems faced by both Bank of America and TD Bank are outdated policies and processes, insufficient training of employees, and inadequate resources devoted to AML initiatives — things that community financial institutions should keep in mind when looking at their own AML processes. Since many smaller financial institutions rely on legacy systems, it is important to ensure that AML monitoring is sufficient, as criminals are aware of the ease of getting around outdated policies and rules. A healthy balance between automated technology oversight for tasks such as onboarding and day-to-day monitoring coupled with active oversight by well-trained employees is critical. It is equally important to ensure that employees throughout your entire organization are kept up to date on common AML tactics among criminals and the red flags to look for, as well as the things regulators are watching for. Key areas to strengthen your institution's AML initiatives:
- Enhancing processes. Review your organization’s onboarding processes and conduct routine audits to ensure adequate Know Your Customer precautions are in place and employees are aware of their importance.
- Monitoring compliance. Ensure AML monitoring systems are kept up to date and remain compliant with changing regulatory requirements, and that monitoring is done in real time.
- Increasing training. Conduct regular AML training for employees throughout your organization, from the board and senior management to tellers.
- Assigning expertise. Determine the areas where technology can be most effective and those where human expertise is needed most. Higher-risk customers and transactions should be identified, and knowledgeable employees should be dedicated to overseeing more complex AML issues in these cases.
- Staffing up. Make sure your organization has an adequate number of people devoted to AML oversight, they are continuously trained and kept abreast of regulatory changes, and employees know what to do when red flags are observed. The process for reporting and dealing with red flags should be clear to employees throughout your organization.
- Maintaining contact. Stay in touch with regulators and openly communicate any concerns or questions that come up within your organization.
As regulators step up their AML oversight, community financial institutions should take time to learn from the high-profile mistakes of organizations such as TD Bank and Bank of America. Implementing strong AML practices can not only reduce the risk of regulatory issues for your organization, but it can also help build trust among customers and enhance your reputation.
