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



We Are NOT Liberty Reserve

MSB Talk 4

I am sure that you all have read the numerous articles and news accounts of the $6 billion laundered through Liberty Reserve.  My intention is to look at various aspects of the Liberty Reserve case which all of our fellow colleagues in the foreign exchange, precious metals and legitimate money transfer business would never implement.   We must not allow anyone to link our totally transparent business activities with an outfit such as Liberty Reserve.

First of all, our fellow business entities operate within the confines of the U.S regulatory system.   Thus, many of us are registered with FinCEN as a MSB or obtaining a relevant State Money Transfer License.  Others would be registered appropriately in their various industry associations.   Liberty Reserve was blatantly conducting money transfer business and did not possess any such appropriate state licenses.  Without this license, with no regulatory oversight – who knows what due diligence if any was conducted with their customers and trading counterparties.

Second, with the mentioning of due diligence, it appears that Liberty Reserve accepted customers with the basic requirements of an e-mail address, a name, address and date of birth.  But what was not required, it seems was any verification of the customer’s identity.   What I am sure of – is that all of our upstanding fellow financial institutions have a strong Know Your Customer protocol prior to accepting anyone as a customer.  It is simply not worth the reputation risk of linking our institutions with criminal elements.

Third and here it becomes a bit confusing.  From the New York Times Article on May 29, 2013 ‘U.S Says Currency Exchange Was Online Hub for Laundering of $6 Billion’ customers did not directly fund Liberty Reserve. In fact the account holder would direct his or her regulated bank to transfer U.S Dollars to a Third Party Exchanger which was an unlicensed money-transmitting business located in Russia, Nigeria and Vietnam.  Then that Exchanger would then convert the money into digital or virtual funds for deposit into the holder’s Liberty Reserve account.


It is here where I am positive that no such payment policy of ours even resembles that of Liberty Reserve.  We would require our accepted and approved customer to directly pay our institution’s account at a regulated bank in the U.S.  Not to have this simple requirement would mean there is no transparency.  And what I cannot comprehend is why the legitimate customers as opposed to the criminals would even conduct such a questionable payment process.  Would you or I just arbitrarily wire funds to an unknown entity in all places such as Russia, Vietnam and especially Nigeria!  And I would be curious to know what type of ‘due diligence’ were the regulated U.S Banks conducting when wiring funds to ‘questionable’ companies in High Risk Compliance countries.

I have mentioned these differences because I am hoping that the Liberty Reserve fiasco is not going to affect us in any way. I have no idea of what the fall out will be from this situation as it affects the U.S Banking System.  We certainly do not want the banks in the U.S to have any additional fears of dealing with legitimate non-bank financial institutions which conduct business with the general public.  And we have to disassociate ourselves with entities such as Liberty Reserve so that the legitimate public can trust dealing with us.

-Allan Ramlall