There are several AML failures that exist within the US financial structure, or we wouldn’t have the people gaining illicit funds being in the top income brackets. The problems with the financial structure in this respect is rather clear, and deals mainly with AML methodologies.
Firstly, often times AML regulations are to applied to correspondent accounts in a manner most befitting of dedicating true AML activity. Quasi-AI algorithms are most often used with user pattern detection in order to take care of this task, however the faults in this are inherently clear. As well, most of these algorithms were not written by people with banking knowledge, but those with computer science backgrounds with input from banking individuals (such as yours truly). And in general, most of these program lack good programming logic, pattern detection is a method that is steadily becoming outdated, and with a little tweaking of the code, can be manipulated by an end user to dance to their own tune. Because some banks feel that these programs are inadequate, the only other option is to go through the hard copy records with manual review, which in turn leads to user defined errors, and the possibility of buoying out an employee that is scanning these records. The latter of these is the most proficient, as most of these personnel’s background is in data entry, and the pay for such an activity makes the offer of laundering quite lucrative. The simplest method that banks use is monitoring of wire transfer activity, however this is also practiced very little as well. When this methodology is practiced however, it is a legal fiasco and can often time take up to months, to years for an resolution to come of it, easily enough time for the launderer to pay an employee to give him word of this, and establish a different correspondent account at a different institution.
It is important to realize that corruption plays a significant role in these activities, above the techniques and methods that the launderer uses. A well versed launderer can perform his activities, and succeed. However, when there is an employee on the backend system that can help, it can be imagined how much improvement is stacked with the process.
The financial regulatory system has failed for several reasons, however there are two large ones that are particularly noteworthy. The first of these is checks and balances, it is clearly not a practiced method of US banks to keep tabs on Foreign correspondent accounts. These is tiered, and if the shell bank knows how to work the system, can nest accounts wired through banks in order to cover up the process even more. This last sentence may appear somewhat cryptic, however it is really quite simple. So far, we have been assuming that a foreign bank has a direct relationship with the US counterpart. However, as stated before, this can become nested, meaning that a foreign bank does not have a serial process, but rather uses correspondent accounts through other foreign institutions as well. As the reader can imagine, this can became a web of legal and financial confusion. In order to regulate this, the US banks would have ot perform checks on all of their client banks with correspondent accounts.