AML training is essential to the operation of regulated financial services firms in that it familiarizes employees with the legislative and compliance information necessary to stay abreast of current developments in the field and best practices.  In the current global financial environment, it is essential that employees are aware of, and know how to, identify money laundering and attempts by terrorist organizations to finance dangerous enterprises.  Ultimately, employees are expected to maintain a high degree of diligence vis a vis the customer’s identity so that any suspicious activity can be identified and investigated.  Training is crucial if techniques aimed at countering illicit activity are to be effective in the long-term.

One particularly important aspect of AML training is ensuring that employees make proper use of detection and prevention techniques year-round, not just in the wake of periodic training modules.  One way to apply a “practical” solution is to circulate idealized case studies that present a problem, identify the proper techniques for identification and resolution and illustrate a positive outcome.  Another effective “real life” approach is to make trainees aware of news stories that point to the insidious nature of the crime involved, its destructive potential and the repercussions of not following protocols prescribed for avoiding a worst-case scenario.  Employees are far more apt to adhere to a dedicated, programmatic approach if they understand what’s at stake and that money laundering is a year-round problem, requiring vigilance and discipline.

A more detailed breakdown of training needs must take into account introductory training for new employees, particularly those who can expect a high degree of personal contact with customers.  Training should include a thorough rundown of due diligence practices and reinforce the fact that they are required to disclose instances of malfeasance.  If applicable, training must stress the need to follow identity verification checks, criminal background checks (where applicable), and other up-front security “fail safe” measures.  Perhaps the most difficult skill to learn is how to discriminate between normal and abnormal financial behavior.  This amounts not only to knowing one’s customers but learning key warning signs, tip-offs that may lead to the identification and prevention of a money laundering threat.

Company officers and, in particular, money laundering reporting officers (MLRO) must have a more expansive understanding of the threat if they are to be successful at communicating the urgency of constant monitoring to other employees.  Ultimately, these personnel are responsible for ensuring that the firm is fully prepared for the threat posed by money laundering.  Among other things, the MLRO needs to be familiar with the firm’s individual services in order to assess how vulnerable each department is to money laundering.  As the final judge of whether a threat warrants reporting, the MLRO bears a greater degree of responsibility than any other in staying abreast of new techniques and ensuring that others are aware of them.  As well, he is charged with maintaining a line of communication between the firm and the relevant law enforcement agencies.

One of the most effective tests for determining staff readiness is one that duplicates, as nearly as possible, the real-life circumstances that might arise as the result of an AML threat.  To that end, a particularly well-conceived readiness plan was tested through a kind of “fire drill,” in which staff members were required to identify a viable potential threat based on established criteria, and react according to compliance protocols.  Today, this is considered one of the best means for embedding best AML practices into a firm’s everyday routine.

In recent years, much larger financial service firms could have benefited from a “real world” simulation.  In 2004, Riggs Bank was hit with sanctions, including the highest fee on record, which led directly to the bank’s collapse.  The most damaging outcome of the consequent penalties, levied for failing to comply with AML regulations, was the bank’s crippling loss of confidence among the public at large.  This perhaps more than anything delivered a coup de grace from which Riggs never recovered.  The most important lesson to be learned from the Riggs collapse was that simply complying with training requirements is not enough.  Executives and MLROs must see to it that good monitoring practices and response preparedness are fully ingrained in the firm’s culture.