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THE CURRENT TRENDS AND CHALLENGES OF HIRING, DEVELOPING AND RETAINING TALENT IN AML AUDIT AND COMPLIANCE

Jonathan E. Kay, CAMS-Audit


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Executive Summary

The primary objective of this white paper is to offer considerations and suggestions for how an

internal audit or compliance program at a financial institution (FI) hires, develops and retains

employees for their internal staff. Specifically, what are the key skill sets an institution should

look for in candidates when building an internal anti-money laundering (AML) compliance/audit

staff? Should FIs seek candidates with traditional audit skills, or should firms focus on candidates

that possess a firm foundation in AML and financial crime compliance? This paper will examine

the challenges and options that FIs have when staffing a robust and comprehensive AML audit

function. In addition, this paper will examine the process, including but not limited to:

The hiring process for an AML audit department

The specific needs of a department

The challenges of money and resource allocation

Challenges in resourcing

Retaining and developing talent

Finally, this paper will examine the challenges that are arising from the significant talent poaching

taking place between FIs and even within the same organization (i.e., between first, second and

third lines of defense) and its resulting impact.

The information provided herein should provide assistance in dealing with the ever-changing

regulatory environment and the impact it has on an institutions’ talent needs. While this white

paper will not cover each unique circumstance that institutions face, it will provide a rounded start-

to-finish look at the process and questions that should be asked in order to position each

institution’s AML compliance audit staff for success.

*The views expressed in this paper are those of the author, and the author alone.*

Introduction and Background

In the current regulatory environment of heightened expectations it is more important than ever to

have an AML audit staff that possesses the necessary skill set to satisfy the institutions size, risk

appetite, regulatory expectations and the institutions over all goals. Perhaps even more important

is the institutions’ ability to retain and develop its staff, as it is no longer enough for an organization

to simply have capable auditors—this is because regulators are taking special note of the auditors’

institutional knowledge, or lack thereof. Simply put, not having a staff that satisfies both basic and

institutional knowledge can lead to enforcement actions. According to the Association for Certified

Anti-Money Laundering Specialists’ (ACAMS) moneylaundering.com in 2014, the U.S. Treasury

Department, the Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve Board issued

45 enforcement actions for anti-money laundering (AML) infractions, and although the total

number of infractions was down for the year, the total dollar amount of penalties was up. In fact,


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banks paid $351 million in 2014—roughly seven times the fines levied in the previous year,

excluding concurrent fines.1

In the past, most AML audit departments would focus their hiring on finding staff who are auditors

first and subject-matter experts second. However, this trend is changing with various organizations

thinking outside the box with their hiring strategies now focusing on individuals who are highly

analytical, often from non-banking backgrounds. I have firsthand experience with this trend as I

myself moved into an audit role after spending seven years in an operational risk position within

the business, acting as the first line of defense.

The change in the industry was evidenced in the 2014 Thomson Reuters Cost of Compliance

Survey.2 The survey is based on institutional self-response and is aimed at encouraging open

responses on the growing concerns in the compliance field. There were over 600 respondents from

over 70 countries. In particular, the survey revealed three key findings that show the importance

of having the right people for the right job.

Conduct Risk

According to the survey, the main change in 2014 was a stronger focus on conduct risk. Changes

to hard-and-fast rules are one thing, but changes to expectations regarding culture, tone from the

top and conduct risk, put firms in a much less certain place about what they are supposed to do.

The challenge becomes providing qualitative measures and benchmarking against those, despite

variances from institution to institution.

The need to include qualitative measures in management information has highlighted the necessity

for high-quality internal reporting. The Financial Stability Board (FSB) made a point of saying

that management information was an area that needed substantial improvement as part of an

enhanced approach to risk governance.3

Compliance Culture

The regulatory focus will now no longer simply be on compliance with a set of rules or guidelines,

but will increasingly look to explore a firm’s culture—the “how” of the business as well as the

“what.” The regulatory attention on culture brings its own set of challenges for firms and their

already stretched audit and compliance officers. The management of regulatory relations will need

to become a core competency for auditors, compliance officers and senior managers in the coming

year.

1 See moneylaundering.com’s article “Regulators Issued Few AML Fines in 2014, But Packed a Bigger Punch” http://www.moneylaundering.com/News/Pages/133754.aspx 2 http://accelus.thomsonreuters.com/sites/default/files/GRC00814.pdf 3 http://www.financialstabilityboard.org/wp-content/uploads/140407.pdf

http://moneylaundering.com/

http://www.moneylaundering.com/News/Pages/133754.aspx

http://accelus.thomsonreuters.com/sites/default/files/GRC00814.pdf

http://www.financialstabilityboard.org/wp-content/uploads/140407.pdf


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This year will be characterized by the need to shift thinking to accommodate all things culture, as

part of the overarching aim to ensure universally good customer outcomes in a stable financial

environment. Regulatory expectations around the world are changing, and it is no longer enough

for firms to do a bare minimum of compliance with the relevant rulebooks. There is a focus on

senior managers, as well as their compliance teams, to drive a positive and lasting change in

behaviors throughout firms, and for auditors to validate this change.

The global move toward a more judgment-led style of regulation will require staff to have more

sophisticated levels of risk, compliance and control expertise. There is likely to be greater

competition for skilled compliance and audit staff, which will push salaries up and give highly-

qualified compliance officers an incentive to move on if they feel they are not being appropriately

rewarded at their current firm.

Communication with the Third Line

Globally, compliance functions again reported spending very little time liaising with the internal

audit function, a persistently repeated finding which is a growing cause of concern. Although

internal audit must retain its independence, it does need to be closely aligned with the compliance

and other risk functions; independence does not mean isolation. The current, evermore complex

operational environments, as well as the greater focus on the quality of risk management

information, will mean that the most effective firms will be those that have audit, risk and

compliance functions that speak a common language, have aligned work programs, share risk

issues and communicate internally and externally on a consistent basis. Although both internal

audit and compliance functions are likely to be at full stretch, the lives of both departments (and

indeed those of the other risk functions) will ultimately be made easier if levels of communication

and alignment are increased.

Assessing the Specific Needs of the Institution and Department

First and foremost, to adequately staff and hire an effective AML audit/compliance department,

the institution must know what the elements of a sound risk culture are. As previously mentioned,

the U.K. FSB released guidance on this topic in April 2014.3 Three primary areas (shown in the

table below) are absolutely essential to set the institution up for success for effective hiring.


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The institution must keep in mind that there is no such thing as “one size fits all” in today’s

regulatory word. This guidance was reinforced by the Director of the Financial Crimes

Enforcement Network (FinCEN), Jennifer Shasky Calvery in remarks she made in August 2014.

She stated that:

“Our AML regime is risked based, because each and every financial institution—from its

products, to its customers, to its internal procedures–is different. And because of these

differences, it would be impossible to have a one-size-fits-all approach….to be truly

effective, every financial institution needs to consider its own products and practices,

assess its own risk, and develop a program that works best for the particular financial

institution to mitigate its unique risks.”4

Whenever a department begins to hire, whether to build an existing team, create a brand new one,

or replace a vacancy, a thorough evaluation of the current staff’s strengths and weaknesses should

take place. This should include a review of any gaps in subject-matter expertise the department

may have become aware of during previous audits or reviews within the last 12 months. In

addition, a review of the institution’s audit universe and current and upcoming audit plan should

provide guidance on what type of skills will add the most value.

Has the institution recently introduced new products or services? If the answer is yes, then the

institution must assess what skills a particular auditor would need to adequately evaluate the new

products and services. Often this will require searching for resources outside of the institution as

subject-matter experts may not exist in the first or second lines of defense as the products in

question have not been offered yet.

4 http://fincen.gov/news_room/speech/html/20140812.html

Risk Governance Risk Appetite Compensation Governance processes (i) An effective risk appetite Alignment of compensation should be designed to work framework with prudent risk taking and against the erosion of risk (ii) An effective risk appetite effective supervisory management practices statement oversight and stakeholder through changing business (iii) Risk limits engagement in compensation and economic environments (iv) Defining the roles and

responsibilities of the board and senior management in establishing the approved

risk appetite statement

http://fincen.gov/news_room/speech/html/20140812.html


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Certifications and Licenses

It would also be prudent for the hiring team to consider which, if any, certifications or licenses

potential candidates should have. If one of the new products offered is, for example, an investment

product, then a candidate carrying a Series 7 License, formally known as “General Securities

Representative Examination,”5 would be beneficial. Or if the financial institution (FI) is

implementing a new automated monitoring software, then searching for a candidate who has

experience with computer assisted audit techniques would be helpful. Further along those lines, a

candidate with a Certified Information Security Systems Professional (CISSP) or Certified

Information Security Systems Manager (CISSM) designation could provide valuable subject-

matter expertise for audits or reviews covering cybersecurity and AML. This is particular relevant

as the nexus between AML and cybersecurity becomes more focused, as demonstrated by recent

guidance published by New York Superintendent of Financial Services, Benjamin M. Lawsky.6

Lawsky presented proposals that would increase the burdens and potential pitfalls for banks when

trying to prevent cyber-attacks and money laundering. His proposals could increase the onus on

New York chartered FIs (which include most large foreign banks). Specifically, his proposals

included random audits of regulated firms’ transaction monitoring and filtering systems, which are

meant to catch money laundering. Lawsky also suggested his office was also considering

incorporating targeted assessments of those institutions’ cybersecurity preparedness in its regular

bank examinations.7 This type of shift from examiners will require that both compliance and

especially audit have staff that are familiar with these types of systems.

Global Footprint

One other consideration is the institutions’ global footprint. If the FI is a global corporation with

multiple compliance and audit teams spread over different continents, then it is all the more

important that the hiring team look to add a candidate that will give the most geographical bang

for their buck. For instance, if an FI knows that their current or upcoming audit plans require

several regulatory audits in a particular country, then it hardly makes sense to hire an auditor that

would not be based in the country where the review is taking place. For starters this would be

impractical as the travel expense alone can often run into the thousands. Furthermore, regulatory

audits often require several subsequent meetings with the examining body, which means the audit

team, could end up travelling back and forth to the review location several times. It can often help

an FI to incorporate hiring with an 80/20 review allocation. That is the idea where 80 percent of

the audit team participating in an audit will be located in country, and the remaining 20 percent

will travel only if necessary. This approach can not only help with cost, but helps to ensure more

5 http://www.sec.gov/answers/series7.htm 6 http://www.dfs.ny.gov/banking/bil-2014-10-10_cyber_security.pdf 7 http://www.wsj.com/articles/lawsky-proposes-new-cybersecurity-money-laundering-rules-for-banks-1424885911

http://www.sec.gov/answers/series7.htm

http://www.dfs.ny.gov/banking/bil-2014-10-10_cyber_security.pdf

http://www.wsj.com/articles/lawsky-proposes-new-cybersecurity-money-laundering-rules-for-banks-1424885911



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boots are on the ground in the review location, which often makes for better business relationships.

Money Resource Allocation—How do you work with what you have?

Convincing Management of Your Resource Needs

Finding a candidate that possesses the desired qualifications can certainly prove difficult; however,

often equally as challenging is convincing management of your resource needs. Even in the current

world of heightened expectations budgetary restrictions can and often are the rule of the land. The

first step to gaining management’s backing is providing a thorough justification for the requisition.

Does the new position exist because a staff member departed the team? If yes, then this would be

an opportunity to look at what duties the position should continue to provide as well as others

management would like to add. Nothing supports a request for additional resources like showing

the value that the position will bring to the organization, especially if the requesting team can

clearly show any additional tasks that will be carried out by the new staff member. Is the request

being made because of increased work caused by a regulatory finding such as a Matters Requiring

Attention (MRA), Matters Requiring Immediate Attention (MRIA), or a deferred prosecution

agreement (DPA)? This is particularly important to include in a request to management as it

demonstrates the criticality that the position will play in assisting the remediation of a known

regulatory issue. Furthermore, it will help demonstrate to the regulators the institution’s

commitment to reversing the current tide. If management has only allotted for one requisition it is

all the more critical to find a candidate that has more of the preferred qualifications as opposed to

the minimum. Finding a candidate who fits this profile will help support the case for the resource

in the first place because the hire could fill multiple talent gaps within the current team.

Challenges of Competitive Pay

Finding such an eclectic candidate can be thrilling, but getting the applicant to accept an offer

often comes down to competitive pay. This can be particularly challenging when dealing with

what the greater industry level pay is versus what an institution has historically offered. If the

hiring manager is making offers and the reoccurring reason that candidates are not accepting

is pay, then this issue must be escalated to the appropriate management.

Understandably this is no small feat, but if an institution’s pay bands are not in line with their

industry competitors they are simply not going to obtain the talent being sought after. These

conversations are difficult, but as previously stated, any supporting evidence can only help the

case to management, whether that consists of the candidates’ diverse experience, or simply the

applicant providing a competing offer from a peer institution. These items will help illustrate

the competitive landscape that the FI is living with. If all else fails and the applicant and the FI

cannot come to agreeable financial terms it may be time to move on to other applicants. The

hiring manager would not want to go to such great lengths with management to obtain a higher-


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than-average salary if it comes at the expense of not being able to hire any future candidates.

Finally if management is still unwilling to provide the resources needed then it may be time

for the hiring manager to explain that a realignment of the teams’ roles and responsibilities

take place and certain tasks may have to be redistributed.

Co-sourcing and Contingent Workers

When headcount is stripped or not replaced the only option may be to utilize consultants from

outside firms. More times than not this will be the Band-Aid offered, as it saves the institution

from committing to a full-time employee and all the costs that come with it. As in any situation

there are positives and negatives to this scenario. As always it is critical to have a clear idea of

what is needed in the consultant. In addition, obtaining a crystal clear understanding of how

long the funding will be in place for the resource. It can be devastating to a project to take on

co-sourcing, bring the resource up to speed only to be told that funding is no longer available.

In fact, it can actually cost the company more money in the long run to go with co-sourcing as

opposed to hiring a full-time employee as most agencies have clauses stating that if the FI

wants to hire a consultant a percentage of the hires annual salary is paid to the agency. This

makes it all the more important to have a thorough understanding of what agencies the hiring

manager can pull talent from. If a future conversion from temporary to full time is a possibility,

then approaching the hiring as if this resource will become full time will serve the FI well. In

other words, do not treat the consultant as a temporary fix, rather as someone that could actually

be permanent on the team. I myself was a consultant for three years prior to being offered a

permanent position and I can state with confidence that if a consultant is treated as a temporary

“expendable” member of the team, then the output will often reflect just that.

Challenges in Sourcing

Establishing a Good Relationship with Human Resources (HR) and Providing a Clear

Picture of What Kind of Candidate is Needed

A tremendous amount of frustration and time can be saved by simply communicating clearly

what the department is looking for in a candidate with their HR recruiting partners. This is

particularly true now more than ever as candidates are being asked to come with multidimensional

skill sets. So, maintaining a cohesive working relationship with HR colleagues is vital, as they are

the ones who will organize the talent interviewed. One way to assist in this process is to be as

explicit as possible to HR about what the department wants. It goes without saying that every HR

department will require the hiring manager to build a job requisition that often reads like stereo

instructions, but going beyond those basic descriptions and reaching out to the HR recruiter will

ultimately better serve all parties involved. If a department has too many of the same kind of

thinkers in a team and diversity is needed then that would be information to share with HR. If half

of the existing team of auditors have come from one of the same big four firms and that firm’s

methodology has become too embedded within the team and a shakeup is needed then convey that


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as well. If the hiring manager is looking for a basic understanding of AML and certain answers to

questions will help make that clear, than do not wait until the second round of interviews to ask.

Pass those basic questions on to the recruiter and have them ask in the phone screen. While it is

true that an HR colleague might not have the same AML or audit background as the hiring

manager, it does nott mean that some basic concepts cannot be explained. If this information is

shared in the beginning of the process as opposed to halfway through when time is running out to

fulfill the position, then everyone involved is in a better position to find the correct candidate.

Not Being Afraid to Think Outside the Box

A key question raised in this document is what kind of candidate will make the best

AML/compliance auditor. Of course this is a subjective question; however, allowing oneself to

think outside of the box when considering staffing can open up potential talent pools.

Traditionally, when HR is screening candidates for AML and compliance audit functions they first

and foremost look for traditional auditors. Audit skills are an important facet of this role, but basic

audit techniques can be taught, and while one could argue that basic AML skills can be as well, it

is this former operational risk analysts and current AML auditor’s opinion that the complexities of

the current AML world can take much longer to teach, and therefore finding a candidate with a

firm base in AML first may set up the department for a higher rate of success. For instance, starting

an internship position is one way to organically grow a staff member into the ideal team member.

Taking a current college student or recent graduate and embedding them within an AML audit

team not only gives the intern an opportunity to gain a firm foundation in AML, but also allows

the department to craft the intern into the kind of employee the firm is looking for. These types of

team members often make for better worker bees because they have no preexisting notions of what

is the “right” and “wrong” way of doing things. Furthermore, it allows the FI to give back to the

local educational community and it certainly carries a smaller financial commitment from the firm.

Then, at the end of the internship the department can consider hiring the existing intern as an FTE.

I have personally seen this approach work and it shows the institution’s commitment to grow from

within and selfishly it allows the manager to see the intern grow.

One should not be afraid to look for candidates with non-audit backgrounds, I myself came from

the first line of defense and the experience I gained from when I was an active participant in the

business has proved to be invaluable. Candidates with this type of experience come into the AML

audit role having dealt with an array of personalities and this type of experience can only help

auditors when dealing with challenging internal clients. Applicants with non-traditional finance

backgrounds are worth considering as these candidates more than likely are not only looking for a

change but something about the AML world has peeked their interest and this enthusiasm could

be a breath of fresh air to a team and may have the benefit of rubbing off on existing team members.

Finally, even if a non-traditional candidate does not end up on your team, the experiences learned


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from the candidate in the interview process can help redefine what kind of candidate the FI is

looking for.

The Interview Process

Once a pool of candidates has been identified then the all-important yet arduous task of actually

interviewing can commence. While there is no guarantee that a candidate will turn out to be a

successful match for the team, there are certain steps that can be taken to increase that likelihood.

For starters, the type and method of interviewing is often an overlooked aspect that can actually

have a significant impact on how well the interviewer gets to know the candidate.

An initial phone screen by the recruiter is customary and is both logical and efficient. Following

the HR screen what typically follows is another phone screen sometimes by the hiring manager

but more likely with junior members of the team. This is where the process can actually be

improved. On paper it certainly makes sense that a phone call with the candidate would take place

before interviewing in person. However, I have yet to find any person that has ever interviewed on

the phone and stated that it was more than or even equally as effective as a face-to-face meeting.

Perhaps there are geographical challenges that would prevent a candidate from being interviewed

in person in the initial meeting with the team, but if possible, a face-to-face meeting is far more

beneficial for getting to know a candidate. To be able to see your candidate’s body language and

look them in the eye and conversely for them to see your face provides a familiarity that lends

itself to a more personal interaction. Unless the candidate’s position will function remotely there

is absolutely no reason why the person should be screened via the phone especially if the candidate

resides in the same city as the interviewer. The time it takes to make a call to someone versus

bringing someone into a conference room is not significant enough to justify what is lost when

choosing to speak over the phone versus meeting in person.

Ensuring the Candidate has the Required Skills

Depending on the candidates background the team will want to get a sense of the applicant’s

general knowledge on specific areas. While it goes without saying that someone applying for an

AML/compliance audit position needs to demonstrate a sufficient understanding of key concepts,

it is actually just as critical to get a sense of the applicant’s knowledge of general banking

operations. This is because most AML auditors do not just spend their time auditing one particular

business or function, rather, auditors are expected to go into various businesses within the FI and

in a short amount of time gain a basic understanding of key controls and then make an assessment

on that control environment. Generally, time constraints will not lend themselves to teaching a

new auditor everything there is to know about how banking works, so the interviewing team must

ensure the answers they receive from the applicant satisfy their requirements. Targeted questioning

will assist in finding out if the candidate meets the team’s requirements; however, there are other

methods that can be useful.


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Writing Assessments

One way to help with assessing the applicants fit within the hiring team is to ask the interviewee

to complete a writing assessment. This can be particularly helpful in the audit field as so much

time is spent on documentation, and regulators are scrutinizing work papers more closely than

ever. These assessments do not necessarily need to be overly complicated, just as long the applicant

is able to identify and clearly write the who, what, why and what of an audit issue. This will give

the interviewing team a sense of not only the applicant’s overall writing proficiency, but will

ideally give a sense of how the potential employee thinks.

Geographical Challenges

Finding a match can be thrilling, but getting the applicant to accept an offer involves many

deciding factors. Salary is without a doubt a driving factor, and this can be particularly challenging

when the issue of what the greater industry level pay is versus what a smaller institution such as a

community bank can afford. How does a regional or community FI attract talent from major

financial markets such as New York City or London? While there are certainly advantages to

working at large global institutions there are just as many for working at a smaller regional

institution also. Many applicants these days are willing to trade off the higher major market salary

for a lower one if the culture, lifestyle and workload will be more manageable. When it comes

time to sell the applicant on the opportunity, point out why you like the culture and any other

positives that come from working in a smaller market. If compensation is the biggest stumbling

block, then reach back out to your point of contact in HR to see if there are any other incentives

that can be offered. Perhaps a relocation package or a signing bonus may be possible. The bottom

line is that it never hurts to ask, and thinking outside the box in terms of structuring an offer can

only help you and others when a similar scenario comes up again in the future.

If the hiring team continues to struggle with landing a desirable candidate it may be time to take a

step back and analyze what other kinds of applicants could bring to the table. If the role being

filled requires years of experience and is for a more senior position then yes, the search must

continue for someone who will bring the requisite level of experience. But, if the open positions

simply require good analytic skills and the ability to communicate clearly, then going after recent

graduates should be considered. According to a November 2014 Reuters article, American Express

has developed a successful program that involves hiring graduates as entry-level analysts to do

account monitoring work and training and developing them to deal with the “expertise drain.” The

strategy was endorsed by John Byrne, executive vice president of the Association of Certified

Anti-Money Laundering Specialists (ACAMS) stating:


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“‘I think it’s something we need to be doing more of. [The anti-money laundering

profession] is going to expand … we’re dealing with corruption, we’re dealing with

sanctions, that wasn’t the case five, ten years ago, so all of that means there’s going to

continue to be a lot of work.’ He added that college students with a business background,

who might easily grasp the financial crime risks inherent in financial products and services,

would be good candidates for recruitment.”8

Leveraging from within the Institution

It may seem obvious, but sometimes well-qualified candidates are sitting within your own

institution, and looking at applicants in the first, second or third lines of defense is an area of talent

that should not be overlooked. The relationship between compliance and auditing are so

intertwined that each field lends itself to the other, so leveraging existing relationships and contacts

within the second and third lines of defense as a resource is a must. This talent pool is particularly

attractive because the applicants should already have institutional knowledge and the learning

curve could be significantly reduced. Internal transfers can also provide valuable insight to current

processes that may fall within the institution’s current audit plan, and in theory this could help

reduce fieldwork because the transfer will know who and where to go to within the business. Most

importantly if the hiring manager and the team may already have a solid existing relationship and

if both parties find the other enjoyable to work with, then the chances of the hire having success

within the team is much greater.

What to do if it Turns Out Not to be a Good Fit

As with anything in life there are no guarantees and this certainly applies to hiring, developing and

retaining talent, and sometimes a candidate who was thought to be a good match simply will not

work out. However, depending on how these individual scenarios are dealt with, the outcome can

potentially be a blessing in disguise. It is essential to establish what is not working and why. If the

employee has violated a core policy or their conduct is no longer in line with the culture of

compliance, then a dismissal is probably in line. But if the staff member is not delivering on his or

her responsibilities, then a conversation should take place to see what is going on to ensure that

management and the rest of the FI have set the employee up for the best chance to succeed and

this can only be discovered through open and honest conversation. Perhaps a personal

improvement plan (PIP) will be created so the employee has tangible documented items he or she

must improve upon in order to stay with the firm. There should be effort being made by both

parties, so that it feels as there is something at stake for everyone. Because at the end of the day

keeping an auditor or compliance team member that no longer wants to be part of the team, or is

8 http://blogs.reuters.com/financial-regulatory-forum/2014/11/17/american-express-recruits-college-students-to-bolster-anti-money-laundering-ranks/

http://blogs.reuters.com/financial-regulatory-forum/2014/11/17/american-express-recruits-college-students-to-bolster-anti-money-laundering-ranks/



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no longer willing to pull their weight, can actually damage the team by lowering morale and

creating an atmosphere of hostility.

Nepotism at the Top and How it Affects

This topic is controversial and arguably there is not a lot that can be done to fix it at the lower

levels of the corporate ladder, but the topic still warrants discussion. Nepotism exists everywhere

in business and that is no different in AML audit and compliance functions, but it can result in

leadership positions being filled with personnel that are not fit to lead the function. The effects on

the rest of the function are rarely considered. Typically a new global head or executive is brought

in to change the culture or provide a new vision, then after getting established the new executive

will begin to recruit associates from previous jobs to be his or her direct report. While most

institutions have a set framework for hiring senior level employees there is little in the way of

resistance or validation when the hiring takes place. The choice of an executive is sometimes

scrutinized after the fact when a pay review is taking place by internal audit. But by the time these

issues are raised, the executive in question is well into their new position. It cannot be emphasized

enough that putting “cronies” in senior positions not only demoralizes the lower level employees

because they lack confidence in management, but an unqualified choice puts the institution at risk

as presumably these employees have face-to-face interaction with regulators. If the regulators do

not have confidence that senior management has strong command of the subject matter than it is

hard to imagine how that function will ever be perceived as strong in the eyes of the regulators.

You Have Talent in the Door, Now What?—Retaining and Developing Talent

Key Steps to Setting Talent up for Success from Day One

Having a good strategy to set your employees up for success once they are hired is critical to all

parties involved. From day one the employee should feel welcomed and supported. A special

consideration should be taken if the hiring institution is under an enforcement action; DPA or

MRA, as documents related to those actions should be provided to the new hire within the first

week. Especially when it comes to DPAs, materials such as senate subcommittee hearing reports,

statements of facts and the actual agreement can be particularly insightful to the new employee as

it provides context as to what went wrong before and what commitments the institution has made

to the regulator to fix those problems. Furthermore, it will allow the employee to ask about the

status around certain findings and how he or she will be assisting in the remediation of these issues.

Getting the employee setup on systems and equipment can be painstakingly slow depending on

the policies and procedures of the institution. However, keep in mind that the actual onboarding

process of an employee can set the tone and expectations the new hire will have going forward. So

whenever possible the hiring manager should attempt to have the employee built in the system as

much as possible. A little of bit of planning can impact how the new hire views the company from


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day one and will start things off on a good note. Anyone reading this document who thinks this

type of administrative detail is irrelevant and does not have a lasting impact is kidding themselves.

Initial Training

Once the employee has been given an adequate introduction to the FIs’ working environment it is

then time to move on to training. Training is the most important area for new hires. Launching an

employee into a new role or institution without providing comprehensive training is like sending

troops into battle without strategy and proper equipment. Every major regulatory body emphasizes

this year after year and yet many institutions fail to have a well thought out training strategy. In

fact, on November 21, 2014, the United Kingdom’s Joint Money Laundering Steering Group

(JMLSG) finalized amendments to parts of two of its AML/CFT guidelines, which included an

area on employee training. Specifically noting that:

“Relevant employees should be trained in what they need to know in order to carry out

their particular role.”9

In addition to the required learning modules that the bank offers to all new hires, there should be

targeted comprehensive training on both AML and audit topics.

Methodology Training

Methodology training should be the first area covered as every AML audit and compliance

function operate differently. Methodology should cover all aspects of the audit universe at the

FI and a thorough analysis of the Field Instruction Manual. Topics that should be covered

include:

Audit approach paper

Sample sizing rationale

Risk control matrix or its equivalent

Workpaper documentation

Audit Workpaper Training

Due to increased regulatory scrutiny on documentation, Audit Workpaper training is

particularly important. Even the best audit work is irrelevant if the auditor fails to document

his or her work to the highest standards. Some institutions not only provide their own training

on documentation, but will also employ outside firms specializing in effective audit writing.

This two tier approach is often successful as it allows an outside set of eyes to assist in merging

best practices both internally and externally.

9 http://www.jmlsg.org.uk/industry-guidance/article/jmlsg-guidance-current

http://www.jmlsg.org.uk/industry-guidance/article/jmlsg-guidance-current


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Effective Audit Interviewing Training

Several outside firms are now offering services to come onsite to teach effective interviewing

skills. This training really helps to round out an AML auditor’s arsenal. Auditors are detectives

by nature and must validate what businesses report and this involves soft skills such as

interviewing. Interview trainings should at a minimum include sections on body language,

leading questions and confirmation of factual accuracy. An added benefit of this line of training

is that it helps to reinforce the human aspect of what auditors do.

AML and Financial Crimes Compliance Specific Trainings

Most AML audit functions have mandatory training hour requirements and as such the FI must

provide a means to obtain those hours internally as well as externally. One way to do that is to

offer specific subject-matter trainings. There is a wide array of topics that fall under the

financial crime compliance umbrella. Topics to be covered in a 12-month cycle can include:

Trade-based money laundering

Correspondent banking

Cyber-crime and money laundering

Elder financial exploitation

Tax fraud and evasion

Omnibus concentration accounts

OFAC policy and sanctions

Anti-bribery and corruption

Counter-terrorist financing

Insider abuse and know your employee (KYE)

Foreign Account Tax Compliance Act (FATCA)

Certifications

Certification trainings are a win for everyone involved. It shows a commitment from the FI in

its employee’s future and its desire to retain and develop them. It shows regulators the FIs

commitment to employing well-qualified subject-matter experts who are helping to reinforce

the culture of compliance and the mission to uphold a sound risk environment. And finally it

gives the staff something to work towards and allows the employee to bring the knowledge

gained back to other team members.

Dealing with Poaching and how to Keep Your Talent Happy

Ultimately everyone wants to work with staff that are knowledgeable, hardworking, and

pleasant to be around. However, as previously stated much of that is contingent on the FI

creating an environment that will lend itself to a happy employee. Currently the AML

compliance auditor is in higher demand than ever before with increased enforcement actions


16 | P a g e

and MRAs, and with that demand comes poaching from other firms. As stated in the

introduction, poaching presents a challenge to the FI on many levels. For starters every time

an employee departs to pursue an outside opportunity it disrupts the dynamic of the team. It

can also pull morale down as other team members may start to doubt whether they should

continue with the firm. It can also cause regulators to raise issues about the staff’s institutional

knowledge, or lack thereof caused by too many new employees. It is true that if an employee

wants to leave they will but if a manager wants to hold on to the employee they should do

everything in their power to achieve that. Compensation will most certainly be a part of that

equation but less quantifiable actions such as the manager expressing how much the FI values

their work and asking the employee what besides compensation are they looking for.

Sometimes it is simply a financial decision and in those cases there is only so much the

manager can do. But management can show commitment to the employee in other ways too,

such as investing in more training, certifications, or even the gesture of updating the

employee’s technology. This last item may cause a roll of the eyes, but anything an FI does to

increase the employee’s ease of work and productivity is a win for everyone. Internal poaching

from other departments within the same FI is often even more challenging as politics and

personalities will come into play. A best practice is to approach these scenarios with open

dialogue and fairness, and if everyone is honest a reasonable outcome can be achieved.


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References

1. Colby Adams, Kira Zalan, Irene Mandongo. (2015, February 15) “Regulators Issued

Few AML Fines in 2014, But Packed a Bigger Punch”. ACAMS Moneylaundering.com


2. Stacy Enlgish, Susannah Hammond (2014) “Cost of Compliance 2014”.

Thomson Reuters Accelus


3. (April 7, 2014) “Guidance on Supervisory Interaction with Financial Institutions on Risk

Culture: A Framework for Assessing Risk Culture”, Financial Stability Board


4. Jennifer Shasky Calvery, (August 12, 2014) “Remarks of Jennifer Shasky Calvery,

Director Financial Crimes Enforcement Network”, FinCEN


5. (March, 2015) “Series 7 Examination”, U.S. Securities and Exchange Commission


6. Benjamin M. Lawsky (December 10, 2014) “New Cyber Security Examination Process”,

New York State Department of Financial Services


7. Christopher M. Matthews (February 25, 2015) “Lawsky Proposes New Cybersecurity,

Money-Laundering Rules For Banks”, The Wall Street Journal

http://www.wsj.com/articles/lawsky-proposes-new-cybersecurity-money-laundering-

rules-for-banks-1424885911

8. Brett Wolf, (November 17, 2014) “American Express recruits college students to bolster

anti-money laundering ranks”, Reuters

http://blogs.reuters.com/financial-regulatory-forum/2014/11/17/american-express-

recruits-college-students-to-bolster-anti-money-laundering-ranks/

9. Joint Money Laundering Steering Group, (November 21, 2014) prevention of money

laundering/combatting terrorist financing, 2014 Revised Version, Guidance for the UK

Financial Sector Part I”¸ JMLSG-Joint Money Laundering Steering Group













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