The month an AML remediation trigger has to be armed by
The catch-up branch of an AML transition plan has a deadline, and it is fixed before the programme starts by two numbers that have nothing to do with the book.
A bank sizes its anti-money-laundering back book against the transition the draft
technical standard describes: five years for most customers, one year for the higher-risk ones.
It staffs for that plan — 120.1 analysts on a portfolio of 250,000 customers
— and it writes into the programme plan that if the adopted standard removes the five-year
window, it will catch up. The catch-up branch is the one nobody sizes. It has a deadline, and
the deadline arrives in month 8.
That date is not a matter of judgement and it is not a function of the portfolio. It falls
out of two numbers that are already known on day one: the length of the window, and how long it
takes to make a new analyst productive.
The two plans, and the gap between them
The whole book is 82,062 analyst-days, or 373 analyst-years, once the four
tranches are costed at their own throughput — 12 files an analyst-day for a re-rating,
0.8 for an enhanced due diligence file, a factor of fifteen between them. Spread over the two
windows, the standing team is 120.1 analysts. Compressed into one year, it is 373.
The factor is 3.11.
Being wrong the cheap way — staffing for one year and finding the transition intact
— costs €21,501,136 of temporary over-staffing in year one, and finishes the
programme in month twelve instead of month sixty. That is a number a finance director can
approve or refuse. The other branch is not a number of that kind, and the reason is not the
volume of work.
Why the catch-up branch has a wall in it
If the adopted standard lands in month n, two things have happened. Some of the
work is done — the standing team has been running since month one. And some of the year
is gone. But a third thing has happened that is easy to leave out: the months between n
and the deadline are not all usable. A new analyst hired in month n is not productive
until month n plus 3.2. Hiring on the last day of month 8 buys nothing at all.
News lands in month
Effort delivered
Days still to do
Productive months left
Analysts required
× the standing team
1
2.7%
79,861
7.77
561
4.7
2
5.4%
77,660
6.77
626
5.2
3
8.0%
75,459
5.77
714
5.9
4
10.7%
73,258
4.77
838
7.0
5
13.4%
71,057
3.77
1,029
8.6
6
16.1%
68,856
2.77
1,357
11.3
7
18.8%
66,655
1.77
2,058
17.1
8
21.5%
64,454
0.77
4,585
38.2
9
24.1%
62,253
none
—
unreachable
10
26.8%
60,052
none
—
unreachable
11
29.5%
57,851
none
—
unreachable
12
32.2%
55,650
none
—
unreachable
Staffed for five years at 120.1 analysts. The window is one year; a new analyst is not productive for 14 weeks.
Read the last two columns together. At month six the requirement is
11.3 the standing team — and by month eight, when only 21% of the book has
been cleared, it is 38.2. The work remaining has fallen by a fifth over those two
months. The requirement has more than tripled, because the denominator is collapsing faster
than the numerator.
The formula, and what is not in it
Write the two lines out and the programme decision becomes arithmetic. With a window of
W years, a lead time of L weeks, and r the factor between the
compressed plan and the standing plan:
last month a trigger can be armed = 12W − L/4.33,
rounded down — here month 8, with the true pole at 8.77.
What is missing from the second line is the point. There is no customer count in it, no
segmentation, no throughput rate, no analyst cost. Twenty-five times the portfolio and the date
is identical; double every throughput rate and it is still identical. The size of the book
changes the euros and nothing else.
Portfolio
Analyst-days
Five-year team
Multiple at month 6
Last recoverable month
100,000
32,825
48.0
11.31
8
250,000
82,062
120.1
11.31
8
800,000
262,600
384.2
11.31
8
2,500,000
820,625
1200.6
11.31
8
Twenty-five times the book. The euros move; the date and the multiple do not.
The first line has one more thing to say. Set n to zero — the adopted
standard lands on the first working day of the programme, the best case there is. The
requirement is still 4.25 the standing team. There is no month in which the
catch-up branch is modest. A programme plan that says “we will scale up if the transition
is removed” is describing a 4.3-fold hiring round at best and an impossible one after month
8, and those are the only two states it has.
The one lever that moves the date
Only L appears in the deadline alongside the window itself, which means the
recruitment lead time is the only thing management can do that buys decision time. It is also
the cheapest line in the whole programme.
Recruit-and-train lead time
In months
Last month a trigger can be armed
Decision time gained
0 weeks
0.00
month 12
+4
4 weeks
0.92
month 11
+3
8 weeks
1.85
month 10
+2
12 weeks
2.77
month 9
+1
14 weeks
3.23
month 8
—
18 weeks
4.16
month 7
-1
22 weeks
5.08
month 6
-2
26 weeks
6.00
month 5
-3
A one-year window. The portfolio, the segmentation and the throughput rates do not appear in this table, because they do not appear in the formula.
Cutting the lead time from 14 weeks to eight — a pre-cleared recruitment panel, a
framework with an agency, a training course written before it is needed — moves the
deadline from month 8 to month 10. Two extra months of watching an
unadopted instrument, bought with work that costs a fraction of one analyst-year.
What this changes in the programme plan
The trigger cannot be the publication of the adopted act. Publication may come after
month 8, and on that branch the trigger fires into a wall. It has to be a dated review
— month six or month seven on these numbers — at which the absence of news
is itself the signal, and at which the firm either commits to the compressed plan or accepts
that it can no longer choose.
Three lines are worth putting in front of the committee, and none of them needs a view on
what the standard will say. The date the option expires, computed from the window and the lead
time. The multiple required on the day of the review rather than on the day the news arrives.
And the cost of the cheap error — €21,501,136 here — set beside a branch that has no
cost because it has no size.
The chapter says the asymmetry is the reason to plan for the shorter transition. The
arithmetic says something narrower and more useful: the asymmetry is not between two costs, it
is between a cost and a deadline, and the deadline is known before the programme starts.
The workbook behind this article
Every figure above is a live formula in the companion file for
The EU AML Handbook, which also holds the four-tranche reconciliation, the month-by-month asymmetry table, the outreach funnel and the exceptions register that falls out of it. It is free, and it needs no account and
no email address.
Should corporate debt be fixed or floating?78.1818 per cent of gross debt fixed, and a net floating exposure after cash of -608,000.00 — the proportion, not the instrument.
Does an undrawn revolver count as liquidity?67.4567 per cent of the headroom, and it leaves at a fall in annual revenue of 8.4127 per cent — not the 13.3333 per cent the board deck implies.
Does supply chain finance count as debt?66,049,315 released, and leverage of 2.7622× or 3.1362× depending on which balance the test is asked of — the second is a breach at today's EBITDA.
How do you set a minimum cash balance?Three components, 124,596,281 in total — and the double count that turns a margin of 27,403,719 into an apparent shortfall of -3,988,281.
Is a 2/10 net 60 discount worth taking?An annualised 14.8980 per cent against a revolver at 4.50 per cent — worth 5,471,890 a year, and 0.3132 turns of reported leverage.
At what wealth does a family office pay?A five-person office costs the same $2,442,000 at $100m as at $2bn. Against a tiered multi-family schedule the two curves cross exactly once.
Does the fulcrum move with enterprise value?A worked capital structure at three enterprise values. The break migrates from the first lien to the subordinated notes without a single document changing.
How many companies does a reserve pool defend?Holding pro rata to the Series D costs $14.76m per company. A $40m reserve defends 2.71 of forty — and 61 per cent of the cost is the last round.
How much room a 1.15x downside actually leaves79 basis points of margin. The leverage covenant fails first, five basis points before the coverage covenant the chapter reports on, and 4.6 per cent of EBITDA is the whole cushion.
How the GP catch-up is actually solvedMost write-ups state the catch-up formula then hardcode the answer. Set it as a solve and it moves on its own when the carry rate does.
Six ways to state the same fund's return7.12 per cent, 18.04 per cent, or 1.323 times the public market — one fund, one set of flows. The eleven-point gap is the valuation, and it is not cash.
The IRR at which a closed-ended fund merely tiesA drawdown fund advertising 13.25 per cent ties an evergreen netting 8.64. On committed rather than called capital, 78.7 per cent of the edge vanishes.
Two routes to the same NAVFive findings in one quarter-end close, and not one of them was a modelling error. Every one was a control that did not exist.
What a CBAM certificate buffer costs to holdCarry and protection are both linear in the buffer, so the break-even probability is identical at 5 per cent and at 30 — and 2027 costs exactly twice 2026.
What a clawback actually collateralises24 million recovers 13.20 net of tax and 7.20 is escrowed. The rule is e ≥ 1 − t, and every euro won on the tax clause lands uncollateralised.
What a co-investment programme actually saves37 basis points, and a 22.8 per cent total-loss rate erases it. At the usual per-deal cap a single failure is 37 per cent of the annual cohort.
What a diligence exercise actually recoversEighteen basis points is only the part that reaches the yield. Three of the four instruments never do, and the exercise is worth thirty-one.
What a follow-on reserve is actually worth0.019 turns under plain dilution, 0.285 under pay-to-play. The optimum is a property of the shareholders’ agreement, not of the portfolio.
What a lease mark-to-market is actually worth5,788,000 becomes 807,365 once the over-market stream, the expiry dates and the cost of re-letting are priced — and nothing at all below a 43.7 per cent renewal rate.
What a minimum payment actually does£81.53 leaves the account and £20.46 reaches the debt. On minimums alone the set clears in 258 months and repays 1.78 times what was borrowed.
What a month of delay costs in an enforcement463,000 euros of present value a month. No single error about enforcement, and no pair of errors, moves the indifference point from 58.7 cents to the 72 on the table.
What a pro rata cheque actually costsDefending costs 1.25 times the initial cheque across two rounds, not more in each — and below a 521 exit the follow-on dollars come back worth less than they cost.
What a subscription line does to the IRR20 per cent becomes 38.41 on the same asset while the multiple falls. Two dollars of interest buys 18.4 points, and the longer the line runs the cheaper each point gets.
What one point of fees actually costsOne point on the annual charge turns 738,846 into 567,961 over forty years — 23 per cent of the pot, and 2.43 of wealth lost per 1 of fee.
When the promote stops clearingCarried interest is not proportional to performance near the hurdle. It is a step function, and $2m of headroom is what stands between a promote and none.
Why a secondaries bid-ask gap has no zoneThe seller’s floor and the buyer’s ceiling are one formula at two rates. At equal required returns the zone is exactly zero — here it is 11.02 points apart.
Why refining a due diligence rubric makes it weakerThree of twelve managers carry a terminal flaw and the average approves all three. Splitting eight domains into sixteen makes it easier to hide, not harder.
If this book helped — or didn’t — a few lines on Amazon are worth more than they look: they are what the next reader goes on. Write a review. The workbook stays free either way.