Recently announced Gold Globe nominee "Ozark" joins the ranks of "Breaking Bad," "The Big Short," "The Wolf of Wall Street," and many more crime TV and movies showing us that money-making can be a dirty business. The negative impacts on society as a whole are well documented. Increased crime drives up the cost of government due to the need for increased law enforcement. In socio-economic terms, money laundering transfers economic power from the market to criminals, and in extreme cases, can lead to a virtual take-over of legitimate government. In other words, the criminals gain such a foothold they influence, directly or indirectly, the political workings of the country. While on a large scale we all know money laundering is really bad, explaining to members why the credit union employs fraud detection and anti-money laundering tools may require some education on how AML impacts the every day, average credit union member.
From the top, the purpose of AML rules is to help credit unions detect and report suspicious activity that could be signs of money laundering. FINRA, who reviews credit union compliance with AML rules, sets forth minimum standards for a written compliance program, such as a risk-based customer identification program (CIP) that enables your credit union to form a reasonable belief that it knows the true identity of its members. This may entail background and banking history checks. If your credit union falls out of compliance, penalties and fines can result.
If a credit union is fined for non-compliance with AML rules, the result goes beyond just additional oversight and fines. Their reputation can be put at risk, where members will not feel confident keeping their money with them, possibly resulting in a loss of member base.
Additionally, it is important to explain to members that laundered money is untaxed money. It flows through our economy without actually contributing anything to it. On a large scale, the impact can be significant. How does this impact the everyday member? Large influxes of dirty money create false demand that signals policymakers to adjust rates. When the laundering scheme is caught, all that cash suddenly disappears, which can be damaging to the financial markets, impacting the everyday borrower and investor.
Large money laundering schemes can also impact private, law-abiding citizen's property costs. Areas where laundering is prevalent can see large purchases of property with cash, temporarily and falsely over inflating property values.
It's the duty of your credit union, not only to yourselves but to members and the global economy as a whole, to be vigilant in following the AML rules and using credit union compliance tools to assist. This may require some investment, but the impact of not maintaining compliance can be harmful on an individual as well as global scale.