Banking and financial institutions are considering whether to accept virtual currencies, such as Bitcoin, and possibly integrate them into their offerings. In order to do this, institutions must keep track of the latest developments and be aware of key risks, including potential use of the currencies for Money Laundering schemes.

Regulatory costs have increased dramatically relative to Banks and Financials’ earnings and credit losses of recent times. More importantly, the scope of regulators’ focus continues to expand with new issues emerging and getting more attention.

Financial institutions must continue to respond to these immediate pressures, but at the same time find creative ways to continue to grow their organizations. The industry also needs to implement more structural changes in their Compliance processes to make their risk and internal control frameworks more effective and sustainable over time.

To enable a more sustainable compliance model, the following four principles should be considered:

 Own the Risk Control Framework

 Focus on what is getting through the cracks

 Tie Compliance to Operational Risk concerns

 Monitor and measure progress from the top down

Organizations must apply modern changes in the financial world to their AML/CFT Program and other Monitoring Systems.

In order to apply modern changes in the financial world, the AML/CFT Program and other Monitoring Systems must be able to:

 Conduct more research

 Conduct Risk Assessments

 Ensure that all processes are monitored regularly

 Provide training on modern techniques and processes

The Compliance Department will need to transform their role to focus more on Risk Management and Monitoring if they were to onboard Bitcoin customers or become involved in the business. Institutions will have to integrate a common Compliance vision into its business.

Risk Management is one of the most important elements in the Financial Services Industry today. No matter how good you think your AML/CFT Compliance System is, nothing is ever guaranteed. Every financial institution will take a hit from time to time, but having an effective Risk Management Framework and Strategy is what will keep you in the game for the long haul, especially if you decide to trade or do business with Bitcoin.