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  • Writer's pictureChris Gunias

Importance of MSB Compliance Program Independent Reviews   



As one of the pillars of an effective compliance program, your Independent Review is a key tool in determining the overall health of your program. But many times, this key tool is treated as a necessary evil, or a nasty task forced upon MSB’s by their banking partners,

I have often wondered why Independent Reviews have such a negative connotation. As a Chief Compliance Officer, I have always looked forward to my annual independent review because it was a chance for me to test the program enhancements I made over the years and to see what I might have missed or what else I could improve upon. I’ve always viewed the independent review both as a CCO and as the person conducting the review for my clients, as being the closest a MSB can get to a Federal or State regulatory exam without the stress that comes from actually having said regulatory exam.

Identifying compliance program weaknesses via an independent review and then having the time to remediate the weakness, especially if the finding is a violation, is a gift to any CCO and Board member. Not every industry has the benefit of having an independent auditor come in and identify weaknesses and not having them associated with negative press or fines.

The true purpose of the independent review is to focus on assessing the overall effectiveness of the Company’s compliance program. Most independent reviews will not only identify an area of concern but also include recommendations on how to remediate the concern. This is another benefit of independent reviews. The Reviewer is doing half the work for the CCO by providing remediation recommendations. If the CCO agrees with the recommendations all they have to do it put a nice bow on the report and submit it to the Board for approval.

What is included when you hire an external Independent Review firm? The firm will review every aspect of your BSA/AML Compliance Program, including (but not limited to) your policies and procedures, compliance training, past independent reviews, board meeting minutes, OFAC/sanctions, customer onboarding, the Transaction Monitoring System, the Know your Customer/Business process, and your law enforcement/subpoena process.

Most regulators and many banking partners now require an Independent Review on an annual basis. Gone, for the most part, are the days of the 18 to 24-month review cycles. In today’s fast-paced financial services industry, banks are less “understanding” concerning regulatory obligations. Waiting too long or skipping your annual independent review may have negative consequences, including possible regulatory violations/fines or facing the possible risk of having your bank account(s) canceled.

It is never too early to lock in this year’s independent review. Heritage Risk and AML Services still have available dates in 2023 to conduct your independent review. Reach out to us at Chris.gunias@heritageaml.com or 303-725-5900 to secure a time for your review.

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