By Kevin Byrne
I read a recent article last week in which the Satyam Computer Services LTD scandal was discussed. All in all, this story speaks to the very root of BSA/AML outsourcing: Know Your Customer (or Know Your Vendor in this instance).
Financial Institutions (FIs) are burdened more and more everyday with increasing BSA/AML scrutiny, regulations and expectations. The costs associated with compliance, and the burden of attracting and retaining qualified, experienced and trained BSA officers is becoming harder and harder – forcing FIs to consider all options.
Outsourcing is a viable and, in some cases, the only alternative to ensure a compliant program for many FI’s. The solution ensures that the latest automation is in place, that an independent third party is responsible for unbiased review of customers and activity, and that a well trained, experienced staff is ensuring your compliance. For many, that is the smartest way to go and I expect that we will see more and more outsourcing in the future as the expectations are increased, the demands are increased and the revenue stream and staffing is squeezed.
Prior to outsourcing, a rigid review of the provider needs to be completed so that you will “Know Your Vendor.” An FI can outsource the compliance function, but not the responsibility. The burden of ensuring compliance still lies within the FI’s responsibilities, and oversight of that vendor is included. When assessing a provider, consider them an employee – ask about their experience, qualifications and knowledge. Further, consider how you will be able to provide sufficient oversight of this service. Don’t be lead by cost and the ease of passing the duty onto someone else – be cognizant of the fact that this provider is in control of a major compliance function within your institution. Also, remember that the examiners may feel this was as well and will conduct their BSA/AML examination accordingly.
