In April of 2017, the New York Department of Financial Services (NYDFS) released newly updated Anti-Money Laundering (AML) requirements. These AML regulations aim to decrease the consequences of money laundering in criminal domains such as drug trafficking, human trafficking, terrorism, and other illicit undertakings. In the context of money laundering, these illicit undertakings are referred to as predicate crimes or predicate offenses.
The NYDFS oversees the responsibilities of various institutions across the state, but has recently been centered around those who are obligated to follow the Bank Secrecy Act (BSA) and other AML requirements. The majority of this focus is on financial institutions such as banks, trust fund companies, foreign bank branches within the United States, credit companies, investment establishments, and insurance corporations, among others.
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- New York is a large international financial center (if not one the largest) dealing with the majority of foreign exchange transactions.
- The NYDFS is a standard-setting regulator with specific AML guidelines and regulations for companies for which it has supervisory powers.
- These AML regulations are aimed at decreasing the threat of money laundering and financial crime and for strengthening the integrity of New York as an international financial center.
Introduction To New York’s Overarching AML Regulations
Although it might seem as if one regulatory legislation overseeing only one state would have a small international influence, this is not quite the case for New York. By looking into the depths of the regulations, it is clear that while being the financial capital of the United States, New York is the site of 90% of foreign exchange transactions and 80% of trade finance transactions that involve the US dollar.
Nearly half of the money exchanged every day involved trades with foreign transactions, all of which have to abide to applicable U.S. regulation. These foreign trade transactions and financial dealings have reportedly been in US dollar since 1989. This is expected to continue (and even increase) in future years as the US dollar is facing increasingly fewer threats. For example, the Euro had been facing a hard time a few years ago, and the Yen is limiting global handling. Similarly, funds like Bitcoin are too volatile to be used and trusted by the common public.
Selected New York AML Regulations And Recommendations
At the center of nearly all foreign exchange remains New York, and more importantly, the US dollar. As a result, almost all regulations put forward by the NYDFS regarding AML laws are likely to be adapted and maintained worldwide.
These NYDFS requirements include the following:
- All organizations under the supervision of the NYDFS must have a “Transaction Monitoring Program” developed where appropriate for the services offered (e.g., financial institutions processing payments and transactions). Although this obligation is not new, the programs must now be regularly assessed, and the companies must demonstrate that their risk profile matches the established assessment schedule.
- Dedicated personnel needs to be retained and made responsible for designing, implementing, and testing (the effectiveness) of an AML compliance program.
- In addition, periodic training has to be offered and executed, which must also be tied to the risk profiles of the employee groups.
- Organizations are also responsible for maintaining a suitable vendor selection plan, that proves the reliability, precision, and value of such programs to ensure correct and comprehensive data work in their program.
- All Board of Directors members and Senior Officers need to be named to the NYDFS and, for certain positions, approved by the NYDFS.
These NYDFS regulations and protocols have been set in place to decrease the threat of money laundering and other forms of financial crimes. If the US dollar remains leading as expected, these principles will continue to be used worldwide by all organizations with branches in the United States (and New York in particular). These policies are essential in the fight against money laundering.