Citi adopts new AML structure, adds leader as regulatory evaluation looms

May 24, 2016

As Citigroup Inc’s Citibank prepares to try and convince regulators that it has sufficiently bolstered its anti-money laundering program to justify the lifting of an April 2012 enforcement order, the bank has opted to combine its global AML compliance and operations units to create a global AML organization.

“We have taken many actions to simplify our company and consolidate related functions, so we can execute more efficiently and effectively. Consistent with those efforts, we have centralized our AML efforts into a single function. This will improve resource allocation, standardize processes, increase accountability and make us even stronger stewards of the financial system,” said Kamran Mumtaz, a Citi spokesman.

Citi’s new AML configuration, which came into effect on March 1, is led jointly by Alison Clew, a senior Deloitte AML consultant, and Denise Reilly, global head of anti-money laundering compliance at Citi. Both Clew and Reilly report to Barbara Desoer, chief executive of Citibank NA since 2014.

Clew will retire from Deloitte later this month and formally join Citi in June, sources familiar with the matter said. Clew did not respond to a call seeking comment.

Citi is just one of a number of global banks grappling with how to structure their massive AML organizations, which in some cases involve thousands of employees. Some banks pursuing greater efficiency have opted to separate their policy-making compliance units from those dedicated to transaction monitoring and alert handling, sanctions screening and routine investigations, said sources with experience leading global AML operations.

“It is a big dilemma, but some have split (AML compliance and operations) to get the operations side focused on efficient operations and saving money,” said a former top AML official at a global bank.

JPMorgan and HSBC – both of which are also operating under regulatory enforcement orders over AML lapses – have opted to break-up their AML compliance and operations units, said sources familiar with the matter. Neither bank immediately responded to requests for comment.

Bank of America maintains a single, combined AML entity.

Top AML experts, especially the most sought after former U.S. Treasury officials, might not be willing to take jobs with banks that split AML compliance and operations, said one such individual.

“I would not work in a place as the head of AML where I didn’t oversee directly the operations relating to transaction monitoring, investigations and reporting for both sanctions and AML. But it can theoretically work either way,” said the source.

A bank’s AML structure “is an individual choice that sometimes depends on the people involved and the relationships between leadership in operations and compliance,” said Ellen Zimiles, head of global investigations and compliance at Navigant Consulting.

“If you have (an AML leader) who is strong on policy and programmatic issues but not as strong on technology, you might do it a different way. I don’t think you can draw any conclusions from the way it is done at any particular moment at one institution versus another,” Zimiles said.

For Citi, the stakes are high. The U.S. large bank supervisor, the Office of the Comptroller of the Currency (OCC), which issued the 2012 enforcement order to Citi, will soon launch a so-called “validation” aimed at determining whether the bank has sufficiently improved its compliance regime to warrant terminating the order, sources familiar with the matter said. The OCC found in 2012 that Citi had failed to develop adequate information on its foreign correspondent bank and retail customers, had failed to file some of the required reports on suspicious financial transactions, and failed to identify its own internal deficiencies.

It is not clear when that test will be complete. But if the bank fails to measure up, it will have to “draw up a new action plan” and enact it, and then wait for another validation, a process that could take two to three years, the sources said.

A spokesman for the OCC declined comment.

(This article was produced by Thomson Reuters Regulatory Intelligence and initially posted on May 18. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters)


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