Paying Attention to AML Compliance in Mergers & Acquisitions

MSB Talk 4

Mergers and acquisitions are of course very common occurrences in the American economy.  And normally when a merger is being planned and then announced, I have taken for granted that the appropriate financial review and regulatory documentation has been conducted.   After all, if there is some sort of financial impropriety or lack of necessary licenses and corporate registration then in all likelihood, an acquisition or merger would not be successful.

However, lately I have noticed that  Anti-Money Laundering and Counter Financial of Terrorism regulatory issues seem to be playing a crucial role in the above mentioned financial arrangements.  From the top of my head, there were two recent corporate announcements which did not go too well.

First, it was M & T Bank Corp.’s planned acquisition of Hudson City Bancorp Inc which ran into unexpected regulatory issues thus delaying its venture.  Apparently, the Federal Reserve observed wide-ranging problems with M & T Bank’s efforts to deter money laundering.  Most specifically, the Federal Reserve stated that there were problems with the internal controls of the Bank which was necessary to comply with federal anti-money laundering laws and the review of potential high risk customers.

The second incident involved Ebix and its anticipated merger with an affiliate of the Goldman Sacks Group Inc. which had to be cancelled after U.S regulators commenced an investigation into misconduct at the company.   According to a Bloomberg Report, part of this investigation was related to possible money laundering issues in cross-border transactions.  In addition, it was reported that the FBI and the Securities Exchange Commission had an interest in the Liechtenstein based Rennes Foundation which was Ebix’ s largest investor.

My point in bringing up these two incidents is that with today’s Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) regulatory environment, no financial institution can afford to become too complacent in its close attention to such issues and more so when planning a merger or acquisition.   I do not know if any of these two institutions conducted any wrongful activities or had any deficient compliance programs but certainly a rigorous before merger/acquisition internal compliance should have addressed any possible compliance issues whether remote or not.  And if such issues were presented then a high level corporate decision could have been made as to whether to proceed or to delay a merger or acquisition.

A reliable and objective Compliance internal team has a wealth of information from official regulatory material such as the Federal Financial Institutions Examination Council Manuals in which to address Risk Assessment and Internal Controls for a Risk Based Bank Secrecy Act/Anti-Money Laundering Compliance Program.  And in the AML Compliance arena – professionals are well versed in the identification, verification of Beneficial Ownership and the accompanying due diligence to be applied.

Corporations and banking institutions will have to view their Compliance team as key members in their financial strategic plans and generally in their business development.  For without strict adherence to AML or CFT matters, such institutions will not be regulatory protected from a defensive position nor will they be able to execute any successful business moves from an offensive position.

Allan Ramlall



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