Granite Solutions Groupe’s client, a subsidiary of one of the largest Global Wealth Management firms, was subjected to an extensive risk and regulatory initiative mandated by the non-US parent company.
This was in response to the actions of another US-based subsidiary that ran into regulatory difficulties after the US Securities and Exchange Commission determined that there had been a breach of the anti-money laundering component of the Bank Secrecy Act.
The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act, is a US law requiring financial institutions in the United States to assist US government agencies in detecting and preventing money laundering. The BSA is sometimes referred to as the anti-money laundering (AML) law, or jointly as BSA/AML.
The parent bank eventually settled with the SEC for billions of dollars in fines and undertook significant measures globally to prevent a future occurrence.
Opportunity
To address this challenge, the foreign parent decided to institute global policies that were to be interpreted throughout all global operations with corresponding procedures to be applied locally in each market. Their strategy included the short-term necessity of settling with the US government and a long-term strategy of building out global technologies that would take years of infrastructure upgrades to fully implement in each regional market.
Part of the parent banks’ response was to implement a global KYC (Know Your Client) recertification process. The interim solution for the US subsidiary was to create a hybrid process that included manual checks combined with systems-generated reporting.
One of the challenges for the US subsidiaries lay in the fact that the parent bank was, in effect, creating a “one size fits all” solution from a policy perspective to subsidiary banks of different sizes, types, and cultures in different markets across the globe.
Solution
Over a period of two and a half years, Granite Solutions Groupe deployed over 80 consultants in support of their BSA/AML compliance program.
Consulting resources included:
- Program Managers
- Project Managers
- Project Analysts
- Business Analysts
- Data Analysts
- Technologists
GSG’s consultants were selected because of their specific subject matter expertise, project execution skills and experience in supporting compliance and regulatory initiatives.
Consulting Approach
Given the size and complexity of the project, Granite Solutions Groupe worked closely with the banks’ managers and built the relationships that allowed GSG’s deployment team to understand the scope of the resources needed. Once the work was identified in each of the operational units in the different lines of business it was relatively straightforward to determine how many resources were needed to complete the projects by the timeline.
Granite Solutions Groupe provided the consulting expertise to implement the deliverables, facilitate the decision-making process, and execute the decisions made. Alignment with the parent bank, their subsidiaries, and the operational groups they represented was necessary so that the consultant team could coordinate with bank program leadership the array of differing needs represented by both the global parent and the local subsidiary.
The overall approach provided knowledgeable professionals who could work seamlessly with our client’s in-house team to meet these deliverables.
Results
This project met the objectives of the parent company while allowing the US subsidiary to move on with their normal business operations while continuing to support the needs of the global parent.
Granite Solutions Groupe consultants supported the US subsidiary by providing the consulting horsepower to maintain compliance with global standards. The big win for the parent bank was having the confidence that their US subsidiary was on a solid regulatory footing and had the capability to prevent future incidents that could be interpreted by regulatory entities as contributing to money laundering activities.
Over the course of the engagement period, which spanned over two and a half years, Granite Solutions Groupe was able to work with the bank to create a manual process that provided the foundation for developing detailed business requirements for the longer-term technology projects to build automated capabilities.
Lessons Learned
As with any large scale regulatory and compliance initiative, Granite Solutions Groupe’s client faced complex bureaucratic challenges. The parent bank was issuing a global mandate that was difficult and costly to execute. From the subsidiary perspective, some of the policies established at the global level were akin to killing a fly with a shotgun. The situation was pressurized because the subsidiaries had to find solutions that aligned with global, top down mandates, while implementing measures that made sense at the local, regional level.
At a macro level, one of the cautions of the experience for the parent bank and any large global financial institution, is that an ounce of prevention is worth a pound of cure. Having adequate governance in place to ensure compliance with federal and international banking regulations can save billions of dollars and a lot of heartache.
This project, which responded to interim procedural implementations, provided a good lesson - the importance of right-sizing the solution for the potential risk. In this case, the global policy was written with an amount of specificity that added cost, complexity, and frustration because subsidiaries had to make procedural adjustments that didn’t necessarily make sense for their businesses.
Granite Solutions Groupe has the consulting expertise to guide our clients to create a set of global principles that align with global values and work with local leadership to develop policies that make sense from an execution perspective. To ensure compliance, local subsidiaries can work with their global counterparts to implement a reporting mechanism to provide the validation that all policies and procedures aligned both with global principles and local conditions to support local subsidiary bank profitability and sustainability.