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AML/CFT Advisory Services

Measuring risk during growth | Due diligence and acquisitions

November 15, 2017
Read Time: 0 min

Read a more recent blog on merger and acquisition risks and considerations for BSA Officers here.

 Top AML/CFT questions to address for due diligence and acquisitions

Each business day, a bank or credit union gets acquired by another in the United States. Smaller financial institutions are consolidating at a clip of five percent a year. The number of banks above $1 billion in assets has grown over 10% since 2012. When talking with CEOs of financial institutions, most institutions that have grown over $1 billion in assets want to be over $10 billion in just a few years. Those institutions over $10 billion want to grow equally as fast to $50 billion.

While some of this growth will come organically, the majority will come via mergers and acquisitions. These activities come loaded with risk—reputational risk, operational risk, market risk, credit risk, and compliance risk.

When acquiring new institutions, measuring your risk of BSA/AML compliance is an important part of the due diligence process. Financial institutions should prepare for increased regulatory scrutiny to avoid liability and penalties.

Here are questions you should try to answer before, during, and after your due diligence:

  • Do you have the expertise to analyze the other institution’s BSA/AML program?
  • What if the other institution is using an outdated monitoring tool or is manual in their review of suspicious activity?
  • What skills will you acquire from the other institution’s team?
  • What new lines of business will the combined entity enter?
  • Do you have the proper risk mitigation in place for those lines of business?
  • Will the acquisition result in lookbacks that will impact your ability to stay current on daily work?
  • How will you merge the two institutions’ customer or member bases into one monitoring solution?

As your institution grows. make sure you do your due diligence and develop a plan of implementation for a strong culture of compliance.

Abrigo is committed to helping institutions grow successfully. We’ve had years of experience assisting institutions of all sizes as they successfully navigate the risk associated with AML/CFT concerns. With our large customer base, we see institutions that make acquisitions often. Our BSA/AML consulting services group helps them navigate the risk assessments that need to happen during the due diligence process of acquiring another institution as well as any changes to policies and procedures at the combined institution. Whether you need staffing assistance, program and procedure input, or BSA/AML software optimization, we’re here to meet your unique needs.

M&A compliance resources:

 

 

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