Bank Secrecy Act Staying One Step Ahead of Your BSA Examiner September 2009 AMLA Chicago Chapter Event
Dec 26, 2015
Bank Secrecy Act
Staying One Step Ahead of Your BSA Examiner
September 2009 AMLA
Chicago Chapter Event
Session Agenda
• Most frequent apparent violations cited during exams
• Technical violations, including best practices related to CIP / enhanced due diligence
• Part 353 violations
• Pillar violations, including best practices for suspicious activity monitoring systems and the independent test
• Program violations
• Questions
Apparent Violations
0
50
100
150
200
250
Chicago Region Exams
CTR Related
Exemptions
Monetary Instr. Sales
Funds Transfers
CIP Issues
314 (a)
SARs
Pillars
Program
Hierarchy of Violations
• Technical violations
• Part 353 violations
• Pillar violations
• Program violations
CTR Related Violations
• Failure to file / aggregate
• Incomplete filing
• Lack of identification
• Untimely filing
Exemption Related Violations
• Lack of monitoring and review
- Confirm eligibility for exempt status
- Review for suspicious activity
- Document the review
Monetary Instrument Sales & Funds Transfers Records Related Violations
• Monetary Instruments– Missing activity / aggregation
• Funds transfers– Lacking the required information on the
transmittal
CIP Related Violations
• Failure to obtain minimum information
• Failure to document resolution of discrepancy in identification information
• Failure of CIP to contain procedures for verifying customer identity
Enhanced Due Diligence - Best Practices
• Individual customer
– occupation and source of funds
• Business customers
– Basic information: location, ownership, business structure, anticipated level of activity, primary products and services
Enhanced Due Diligence (continued)
• Business customers (continued)
- Enhanced information: financial services providers
Sources of Cash: selling of money orders, traveler’s checks, stored value cards
Uses of Cash: check cashing, lending activities, ATMs
High Risk Customers – Best Practices
• List should be periodically updated
• Documentation of enhanced monitoring needed
Money Service Businesses – Best Practices
• Determination of MSB status
• Registration requirements
• Risk-based additional due diligence
314 (a) Related Violations
• Lack of searching all required records:
- Monetary instrument sales to
non-customers
- Funds transfers by non-customers
- Trust, insurance subsidiary activity
• Inadequate continuity plans for performing searches
Suspicious Activity Reporting Related Apparent Violations
• Lack of filing SARs for transactions designed to evade reporting requirements
• Lack of filing SARs for transactions with no business or apparent lawful purpose
• Untimely filing
• Failure to notify Board
Pillar Apparent Violations
0
5
10
15
20
25
30
Chicago Region Exams
Internal Controls
Independent Testing
BSA Officer
Training
CIP Program
Internal Controls Pillar Violations
• Lack of effective suspicious activity monitoring and reporting systems
• Lack of adequate large currency transaction identification / aggregation
• Failure to search records as required by 314 (a)
• Various other deficiencies, such as the failure to implement an effective CIP program
Suspicious Activity Monitoring – Best Practices
All banks should have monitoring systems for the following:
1) Large cash transactions
2) Monetary instrument sales
3) Funds transfers
4) ACH activity
Large Cash Transaction Monitoring – Best Practices
• Monitoring systems – automated versus manual
• Automated reports – periodic review of filtering criteria and thresholds
• Activity should be compared to CDD information
Large Cash Transaction Monitoring (continued)
• Incoming Currency– Structuring– Activity with no business or apparent
lawful purpose
• Outgoing Currency– Structuring– Activity with no business or apparent
lawful purpose
Monetary Instrument Sales Monitoring – Best Practices
• Cash purchases
• Non-cash purchases:
1) Structuring
2) No business or lawful purpose
Monetary Instrument Sales Monitoring (continued)
• Uses of non-cash sales – Non-suspicious
• Moving of funds to another institution
• Hiding funds from spouse
– Suspicious• Tax evasion
• Hiding funds from court system (bankruptcy, judgments, divorce)
• Medicaid fraud
Funds Transfers Monitoring – Best Practices
• Log of activity containing originator, beneficiary, name and location of outside institution
• Monitor periodically for unusual activity, including the review of international wires
ACH Monitoring - Best Practices
• Capabilities of ACH reporting system– Controls for outgoing ACH activity– Review of incoming ACH activity
• Automated system benefits
• Review of cross-border activity
Independent Testing Pillar Violations
Inadequate scope:
- the lack adequate transaction testing
- the review of suspicious activity
monitoring and reporting
- customer due diligence / enhanced due
diligence
- review and verify the accuracy of
reporting systems
Independent Testing FIL-38-2008
• Risk-based, incorporating the bank’s BSA/AML risk assessment
• Internal auditor, outside auditor, consultant, or other qualified individual independent of the BSA/AML function
• Agreements should grant examiners access to workpapers
• Examiners will request workpapers during exams
BSA Officer Pillar Violations
• Lack of appropriate training – outside training generally needed annually
• Lack of BSA Officer involvement in the
day-to-day activity
Training Pillar Violations
• Over-reliance on on-line training
• Lack of documentation
• Failure to cover bank’s CIP procedures
CIP Pillar Violations
• Missing CIP program in an area – loans, insurance subsidiary, trust department
• Lack of CIP policy
Program Violations
• Lack of an effective BSA program
• Program reflects such systemic or pervasive deficiencies that the BSA/AML program is deemed ineffective at assuring and monitoring compliance with the BSA
Resources
• FFIEC BSA Exam Manual available at http://www.fdic.gov/regulations/examinations/bsa/
• MSB information available at:
http://www.fincen.gov/financial_institutions/msb/
Contacts
Regional FDIC BSA Contact:
John Lombardo
Case Manager Special Activities
312-382-7516
Questions?