bank secrecy act examination manual

Bank Secrecy ActExaminationManual

Second Printing, September 1997 Inquiries or comments relating to the contents of thismanual should be addressed to:

Director, Division of Banking Supervisionand Regulation

Board of Governors of the Federal Reserve SystemWashington, D.C. 20551

Copies of this manual may be obtained from:Publications ServicesDivision of Support ServicesBoard of Governors of the Federal Reserve SystemWashington, D.C. 20551

The price is $20.00 per copy. Remittance shouldbe payable to the Board of Governors of the FederalReserve System by check or money order, drawn ona U.S. bank; or by VISA or Master Charge. Updatesare available at an additional charge. For informa-tion about updates or to order by credit card, call202-452-3244.

Checklist of Supplements

This manual is kept up-to-date by periodic sup-plements. Use the following checklist to record

the filing of supplements. A break in continuitywill indicate a missing supplement.

SupplementNumber

SupplementDate Initials

SupplementNumber

SupplementDate Initials

Bank Secrecy Act ManualSupplement 1—September 1997

The following is a summary of the revisionsand/or additions that have been made to theFederal Reserve’s Bank Secrecy Act Exam-ination Manual since its initial distribution inJanuary, 1995. You may replace the entire con-tents according to Tabs.

TAB 100—WORKPROGRAM

Anti-Money Laundering Procedures

The examination workprogram has been revisedand is now entitled the ‘‘Financial Recordkeep-ing and Reporting Regulations Anti-MoneyLaundering Examination Workprogram.’’ Thechanges were made as a result of the MoneyLaundering Suppression Act of 1994 thatrequires the examination procedures of bankregulators to be enhanced to determine whethermoney laundering schemes are being utilized atthe financial institutions being examined. Spe-cific examination procedures lead the examinerto determine whether the institution maintainsadequate policies and procedures to identify andwhere appropriate, to report suspicious trans-actions related to possible money launderingactivities.

Exemptions

The Treasury’s interim exemption rules andassociated examination procedures are detailedin the Workprogram.

Funds Transfer Rules

The Workprogram incorporates the examinationprocedures regarding the recordkeeping rulesissued jointly by the Federal Reserve and theTreasury effective May 28, 1996. Procedures forexamining the Treasury’s travel rule, effectiveMay 28, 1996, are also included.

Monetary Instruments

Effective October 17, 1994, the Treasury nolonger requires the maintenance of a ‘‘monetaryinstrument log’’ for certain cash sales/purchases

of monetary instruments. The examination pro-cedures have been revised to reflect the changes.

Office of Foreign Assets Control

The Treasury’s Office of Foreign Assets Control(‘‘OFAC’’) administers laws that impose eco-nomic sanctions against, including the restric-tion of transactions with, certain foreign coun-tries, their nationals, or ‘‘specifically designatednationals.’’ The Workprogram includes exami-nation procedures to determine whether insti-tutions are complying with the OFACrequirements.

TAB 200—BANK SECRECY ACT

Regulation

The manual reflects the changes and/or amend-ments made to the Bank Secrecy Act throughAugust 31, 1997.

TAB 400—REPORTING FORMS

Currency Transaction Report

The revised Currency Transaction Report(‘‘CTR’’), effective October, 1995, has beenincluded to replace the rescinded CTR.

Report of International Transportationof Currency or Monetary Instruments

The revised Report of International Transpor-tation of Currency or Monetary Instruments(‘‘CMIR’’) effective September, 1997, has beenincluded to replace the rescinded CMIR.

Suspicious Activity Report

The new Suspicious Activity Report (‘‘SAR’’),effective April, 1996, is included in the Manual.

Bank Secrecy Act Manual September 1997Page 1

TAB 500—EXEMPTIONS

Interim Exemption Requirements

The Treasury’s ‘‘interim exemption rule,’’ effec-tive May, 1996, but not yet finalized, is included.

TAB 900—DATABASES

Currency and Banking ReportsSystem

Changes made effecting the Internal RevenueService’s Currency and Banking Reports Sys-tem are included.

Suspicious Activity Report System

Information pertaining to the access by regula-tory staff of the Suspicious Activity ReportSystem is included.

TAB 1000—SUSPICIOUSACTIVITIES

Suspicious Activity Reporting

The rules regarding the reporting of suspiciousactivity or fraud related matters using therescinded Criminal Referral Form have beenreplaced by the new Suspicious Activity Reportrules, effective April, 1996.

TAB 1100—PAYABLE THROUGHACCOUNTS

Information and examination procedures previ-ously unavailable at the January, 1995 printingof the Manual, is now included in this version.

TAB 1200—FOREIGN ACCOUNTS

U.S. Overseas Offices

Examination procedures for reviewing theoperations of U.S. overseas offices for anti-money laundering compliance are included.

TAB 1300—PRIVATE BANKING

A new section detailing sound practices inprivate banking has been added to this manual.

TAB 1400—SUPERVISORYDIRECTIVES

Private Banking

A new directive regarding private banking issueshas been added.

TAB 1500—OTHERINFORMATIONAL AREAS

Financial Action Task ForceRecommendations

Effective November, 1996, the Financial ActionTask Force (‘‘FATF’’) revised the 40 recommen-dations. The revised document is included.

Currency Transaction ReportQuestions and Answers

The Treasury’s document utilized to answercertain questions related to the revised CTRform, effective October, 1995, is included.

Funds Transfer Rules Questions andAnswers

The Federal Reserve’s/Treasury’s document uti-lized to answer certain questions related to thenew funds transfer recordkeeping and travelrules, effective May, 1996, is included.


Information regarding the Office of ForeignAsset Control is included.

Supplement 1—September 1997

September 1997 Bank Secrecy Act ManualPage 2

Interim Exemption Rule Questionsand Answers

The Treasury’s comments regarding the interimexemption rule are included.

Supplement 1—September 1997


Table of Contents

Section Section

000 INTRODUCTION

001 Introduction

100 WORKPROGRAM

101 Workprogram for FinancialRecordkeeping and Reportingof Currency and ForeignTransactions Examinations(Cover Page)

102 Financial Recordkeeping andReporting of Currency and ForeignTransactions Examination(Summary of Findings)

103 Financial Recordkeeping andReporting RegulationsExamination Workprogram

200 BANK SECRECY ACT ANDRELATED MATERIALS

201 Bank Secrecy Act

300 ADMINISTRATIVE RULINGS

301 Administrative Ruling 88-1302 Administrative Ruling 88-2303 Administrative Ruling 88-3304 Administrative Ruling 88-4305 Administrative Ruling 88-5306 Administrative Ruling 89-1307 Administrative Ruling 89-2308 89-3 Rescinded309 89-4 Rescinded310 Administrative Ruling 89-5311 Administrative Ruling 92-1312 Administrative Ruling 92-2

400 REPORTING FORMS

401 Currency Transaction Report (4789)402 Report of International Transportation

of Currency or MonetaryInstruments (4790)

403 Report of Cash Payments Over $10,000Received in Trade or Business(8300)

404 Currency Transaction Reportby Casinos (8362)

405 Report of Foreign Bank andFinancial Accounts (90-22.1)

406 Suspicious Activity Report

500 EXEMPTION HANDBOOK

501 Currency and ForeignTransactions Reporting Act—Exemption Handbook

502 Interim Exemption Rule

600 KNOW YOUR CUSTOMER

601 Know Your Customer

700 WIRE TRANSFERS

701 Operations

800 REGULATION H

801 Amendment to Regulation H—Procedures for Monitoring BankSecrecy Act Compliance

802 Internal Compliance Program

900 DATABASES

901 Internal Revenue Service Currencyand Banking Retrieval System

902 Suspicious Activity ReportDatabase

903 Federal Reserve EnforcementActions

904 FinCEN Advisories

1000 SUSPICIOUS ACTIVITIES

1001 Check List to Identify PotentialAbuses

1002 SAR Regulation

1100 PAYABLE THROUGHACCOUNTS

1101 Introduction1102 Examination Procedures


Section Section

1200 FOREIGN ACCOUNTS

1201 Report of Foreign Bank and FinancialAccounts

1202 Bank Secrecy Act Review for U.S.Overseas Examination Procedures

1300 PRIVATE BANKING

1301 Sound Practices Paper

1400 SUPERVISORYDIRECTIVES

1401 AD 93-56 (FIS) Treasury Rulings1402 SR 95-10 (FIS) Payable Through

Accounts1403 SR 97-19 (SUP) Private Banking

Activities

1500 OTHER INFORMATIONALAREAS

1501 Basle Committee Statementof Principles

1502 Financial Action Task Force 40Recommendations

1503 Currency TransactionReport Guidance

1504 Funds TransferQuestions/Answers

1505 Office of Foreign AssetControl (OFAC)

1506 Interim ExemptionQuestions/Answers

1600 WORKPAPERS

1601 Workpaper Content andRetention

Table of Contents


IntroductionSection 001

Federal Reserve System personnel prepared theBank Secrecy Act Examination Manual. Themanual contains Federal Reserve policies andprocedures designed to assist Federal ReserveBank examiners in the review of financial rec-ordkeeping practices and procedures of statemember banks and foreign financial institutionsoperating within the United States.

The manual reflects amendments to the BankSecrecy Act through 1997. Periodically, the

manual will be updated to reflect changes insupervisory policies and procedures. Accord-ingly, we solicit the input and contributions ofall supervisory staff and others in refining andmodifying its contents. Please address all corre-spondence to: Director, Division of BankingSupervision and Regulation, Board of Gover-nors of the Federal Reserve System, Washing-ton, D.C. 20551.


Workprogram for Financial Recordkeeping and Reporting ofCurrency and Foreign Transactions Examinations Section 101.0

Financial Institution

Location

Date of Examination

Bank Secrecy Act Examiner

Assisting Examiner(s)

Examination Opened

Examination Closed

Bank Secrecy Act ExaminerSignature Date

Examiner-In-ChargeSignature Date


Financial Recordkeeping and Reporting of Currencyand Foreign Transactions ExaminationSummary of Findings Section 102.0

Work ProgramProcedure Number Findings Institution Response

Findings Discussed With: Date:

Examiner Present:


Financial Recordkeeping and Reporting Regulations Anti-MoneyLaundering Examination Workprogram Section 103.0

Introduction

The Workprogram serves as a guide for theexamination of compliance with the BankSecrecy Act (31 USC 5311, et seq. and 31 CFRPart 103, et. seq. (‘‘BSA’’)); Regulation H,Section 208.14;1 and other related rules andregulations. In addition to ensuring that theinstitution is in compliance with applicable laws,rules, and regulations, an examiner should becognizant of any unusual or suspicious activi-ties. Activities of this nature, such as illegal actsor transactions conducted by employees or cus-tomers, may be an indication of general non-compliance in the institution.

The Money Laundering Suppression Act of1994 requires regulatory authorities to developexamination procedures to determine whethermoney laundering schemes are being conductedat the financial institutions being examined. TheWorkprogram serves as a tool to determinewhether financial institutions not only are incompliance with the technical reporting andrecordkeeping requirements of the BSA, but thatthe institutions have developed policies andprocedures to detect, deter and report unusual orsuspicious activities related to money launderng.2

While the Workprogram is designed to maxi-mize the efficiency of the review process (byusing a sampling or by requiring the institutionto perform an analysis), it is not designed to beall inclusive; therefore, specific situations orproblems identified while conducting examina-tions may require additional procedures thatwould not otherwise be required.

The Workprogram includes examination pro-cedures applicable to most situations that exam-iners encounter during a BSA and Regulation H,Section 208.14 compliance review. It is designedto lead an examiner through the compliance

review; therefore, the procedures must be fol-lowed numerically. Many procedures in theWorkprogram need to be performed only if anexaminer discovers problems or internal controlweaknesses. Consequently, if the Workprogramprocedures are not completed in numerical order,an examiner may perform more work than isnecessary to adequately assess an institution’soverall compliance.

Several procedures in the Workprogram requiresampling, which is either completed by anexaminer or by an institution at the direction ofthe examiner. Because the Workprogram wasdeveloped for use in examinations of varioussizes and types of banking organizations underFederal Reserve supervision, the time-frame ofthe sampling period varies depending on factorssuch as the type and size of the institution,the number of transactions the institution typi-cally performs in the normal course of business,whether there have been previous complianceproblems or problems are suspected, the strengthof internal controls and the audit function, andwhether the institution or its branches are lo-cated in an area known for money launderingactivities. The sample should be large enoughthat the examiner can adequately answer theWorkprogram procedure. For example, in alarge institution that handles a considerablenumber of transactions, a short sample time-frame that includes numerous transactions maybe sufficient to answer the Workprogram proce-dure. Likewise, in a small community bank, alonger sample period may be necessary to find asufficient number of transactions to sample. Theexaminer should document in the workpapersthe sampling time-frame along with support onhow it was determined.

In the column on the right hand side of theWorkprogram, provide a ‘‘yes,’’ ‘‘no,’’ or ‘‘notapplicable’’ response. Some instances may re-quire that you assign a ‘‘not reviewed’’ response.Additional space is also available in the columnto provide comments. Comments are typicallyrequired to provide additional information aboutthe deficiency when a ‘‘no’’ response is given.Providing a ‘‘no’’ answer in the column does notnecessarily signify that a violation must becited. However, numerous ‘‘no’’ responses maybe indicative of internal control weaknesses orother problems that may evidence noncompli-ance with the BSA and/or Regulation H, Section

1. On March 31, 1997, the Board published in theFederalRegistera notice of proposed rulemaking relating to Regula-tion H (see 62 FR 15272, 15280). In the proposal, the existingnumbering of 208.14 is to be renumbered to 208.63. As theproposal is not final, 208.14 will be used throughout thismanual.

2. The Department of Treasury’s Financial Crimes Enforce-ment Network (‘‘FinCEN’’), is providing to regulatoryauthorities and the financial community alike, periodic circu-lars regarding patterns and trends involving money launderingschemes. The FinCEN advisories are available via the Internetat the following address:

http://www.ustreas.gov/treasury/bureaus/fincen/advis.html


208.14. Numerous ‘‘no’’ responses should bediscussed with the examiner in charge to deter-mine an appropriate course of action.

Regulation H, Section 208.14 requires allbanks to develop a written compliance programthat must be formally approved by an institu-tion’s board of directors. The compliance pro-gram must (1) establish a system of internalcontrols to ensure compliance with the BSA;(2) provide for independent compliance testing;(3) identify individual(s) responsible for coordi-nating and monitoring day-to-day compliance;and (4) provide training for appropriate person-nel. Numerous ‘‘no’’ answers in the Workpro-gram may indicate noncompliance with one ormore of the Regulation H, Section 208.14requirements. For example, if numerous largecurrency transactions are discovered that werenot reported as required, it may indicate that theinstitution does not have effective internal con-trols, an effective compliance testing program,or an adequate training program. Violations ofRegulation H, Section 208.14, in most instances,will necessitate that formal supervisory actionincluding Cease and Desist Orders and civilmoney penalties, be initiated against the institu-tion as required by 12 U.S.C., Section 1818(s).

In situations where the institution has failed totake corrective action for deficiencies cited inprevious examinations, formal supervisory actionmay also be warranted. All instances of ‘‘repeat’’deficiencies or noncompliance with Regula-tion H, Section 208.14 compliance proceduresshould be discussed with an appropriate Officerat the Federal Reserve Bank after consultationwith the examiner in charge.

The first section of the Workprogram involvesoff-site planning. The remaining sections of theWorkprogram involve on-site examinationprocedures.

Off-Site Examination Planning

The purpose of the Examination Planning Sec-tion is to determine if the subject institutionexhibits a risk profile suggestive of: 1) noncom-pliance with the BSA; 2) ineffective internalcompliance procedures (Regulation H, Sec-tion 208.14); or, 3) engaging in possible moneylaundering activities. Identifying institutions withsuch profiles should enable the examiner to useresources more effectively.

Y N Comments

1. Do the findings in the previous examination reportindicate a general compliance with the BSA orRegulation H, Section 208.14? If not, briefly iden-tify the deficiencies.

2. If violations or serious deficiencies were noted,does correspondence indicate that corrective actionwas taken? If, because of previously noted deficien-cies, the institution was required to perform analy-ses of: (a) currency flows and the reporting of largecash transactions; (b) exemption limits; (c) salesof monetary instruments; (d) funds transfers; or(e) suspicious activities, were such analysesadequately performed and documented? Be sure toreview documentation.

3. Do the findings in the previous examination report,in areas other than BSA compliance, indicateadequate internal controls and audit procedures? (Ifnot, this may be indicative of deficiencies in theBSA compliance program).

Financial Recordkeeping and Reporting Regulations Anti-Money Laundering Examination Workprogram 103.0


Y N Comments

4. Does a check of the Suspicious Activity Reportdatabase reveal that there is suspicious or allegedillegal activity surrounding this institution? If not,determine whether such information should alterthe scope of the BSA examination. (Refer toBSAManual—Databases).

5. Does a listing of Currency Transaction Reports(CTRs) obtained from the Internal Revenue Service(IRS) database indicate that the institution or anybranch had a significant change in the total volumeof CTR filings compared to the previousexamination? (Refer toBSA Manual—Databases).

6. If cash services are provided to the institution by theReserve Bank, are Cash Flow Reports and/or Intel-ligence Analysis available? If so, do the reportsreveal unusual trends in volume and/or compositionof cash shipments to and from the Federal ReserveBank? (Refer toBSA Manual—Databases).

103.0 Financial Recordkeeping and Reporting Regulations Anti-Money Laundering Examination Workprogram


Internal Compliance Programs andProcedures

Regulation H, Section 208.14, requires thatfinancial institutions establish and maintainadequate internal procedures to assure and moni-tor compliance with the BSA (Refer toBSAManual—Regulation H).

Advisory #1

You should be aware that, even if an institutionmaintains in books and documents what appearsto be a viable internal compliance program, theinternal compliance program is, possibly, notfollowed by the institution. Specific violationsof the BSA, as may be discovered during thecourse of this compliance review, may evidencea lack, or the complete omission, of adequateinternal compliance procedures.

Advisory #2

The sophistication and comprehensiveness of

the institution’s internal compliance programshould be gauged by the type of activitiesengaged in by the institution and the quantity oftransactions subject to the BSA and related rulesand regulations. As an example, a ‘‘wholesale’’institution that conducts no cash transactionsneeds only to have an internal complianceprogram that ensures that should a coveredtransaction be presented to the institution, theinstitution’s employees will have sufficient edu-cation to understand that the transaction may besubject to Bank Secrecy Act requirements andthe employee has the means to obtain additionalinstructions from manuals or employees at otherbranches of the institution. As an alternative, aninstitution that conducts a retail operation needsto have specific and comprehensive internalcompliance procedures. It is your responsibilityto determine the appropriateness of the internalcompliance program based on the institution’sactivities. Keep in mind that all institutions,throughout the organization, should maintain aprogram to detect, and where necessary, reportunusual or suspicious activities possibly relatedto money laundering.

Y N Comments

7. As of the previous examination, had the institutionestablished adequate internal compliance programsand procedures as required by Regulation H, Sec-tion 208.14? If not, list the violations cited ordeficiencies noted.

8. Has the institution developed a written complianceprogram as required by Regulation H—Section208.14?

9. If applicable, does the written BSA complianceprogram, as required by Regulation H, provide forthe following:

a. A system of internal controls to ensure ongoingcompliance (Section 208.14(c)(1)).

b. Independent testing for compliance to be con-ducted by either bank personnel or an outsideparty. List person(s) designated to conductindependent testing (Section 208.14(c)(2)).



Y N Comments

c. Designation of a qualified individual(s)responsible for coordinating and monitoringday-to-day compliance. List individual(s)responsible for compliance and the appropriate-ness of qualifications (i.e. training, experience)(Section 208.14(c)(3)).

d. Training for appropriate personnel (Section208.14(c)(4)).

10. Was the compliance program approved by theinstitution’s board of directors and approval notedin the minutes? If a foreign institution, was thecompliance program approved at the highest levelof United States management as well as by thehome office board of directors?

11. Does the institution’s written compliance programinclude procedural guidelines for the detection,prevention and reporting of suspicious transactionsrelated to money laundering activities?

12. Does the institution’s compliance program includewritten procedural guidelines for meeting thereporting and recordkeeping requirements of theBSA regulations and provide for the following, asapplicable?

a. The filing of a report of each deposit, with-drawal, exchange of currency or other paymentor transfer, by, through or to the financialinstitution, which involves a transaction incurrency of more than $10,000 (CTR, IRSForm 4789) (31 CFR 103.22(a)(1)).

b. The maintenance of a centralized list containingeach exemption granted, with the supportinginformation prescribed in 31 CFR 103.22(f).Each exemption granted after October 27, 1986,shall be accompanied by the required statementand attendant language in 31 CFR 103.22(d)(31 CFR 103.22(b)(2)). (Refer to Advisory #5for further information regarding exemptions.)



Y N Comments

c. The filing of a report (U.S. Customs Form 4790)of each shipment of currency or other monetaryinstrument(s) in excess of $10,000 out of theUnited States or into the United States on behalfof the institution (not its customers), exceptvia common carrier, by, or to the institution,(31 CFR 103.23(a)). In most cases, this refers tothe institution’s cash shipments. (Refer toBSAManual—Administrative Ruling 88-2).

d. The filing of an annual report, Report of ForeignBank Financial Accounts, (Treasury Form 90-22.1) by the institution, where the institutionhas a financial interest in, or signature authorityover, bank, securities or other financial accountsin a foreign country prior to April 8, 1987.(Settlement between branches and affiliates viaDue To/Due From (‘‘Nostro’’) accounts areexempt from filing 90-22.1) (Section 103.24).(Refer toBSA Manual—Foreign Activities.)

e. The maintenance of required records for eachmonetary instrument purchase/sale for currencyin amounts between $3,000 and $10,000 inclu-sive, with the supporting information prescribedin 31 CFR 103.29 (31 CFR 103.29(a)).

13. Do the procedural guidelines include provisions forthe retention of either the original, microfilm, copyor other reproduction of the items listed below, andis each item retained for a period of at least fiveyears:

a. Each Currency Transaction Report (CTR, IRSForm 4789).

b. Documentation to support each exemption anda requirement to retain such documentation fora period of five years from the date it wasdiscontinued (31 CFR 103.22(d)).

c. Each extension of credit in an amount over$10,000, except when the extension is securedby an interest in real property (31 CFR103.33(a)).



Y N Comments

d. Each advice, request, or instruction receivedregarding a transaction which results in thetransfer of funds, currency, checks, investmentsecurities, other monetary instruments or credit,of more than $10,000, to a person, account orplace outside the United States (31 CFR103.33(b)).

e. Each advice, request, or instruction given toanother financial institution or other personlocated within or outside the United States,regarding a transaction intended to result in atransfer of funds, currency, checks, investmentsecurities, other monetary instruments or credit,of more than $10,000, to a person, account orplace outside the United States (31 CFR103.33(c)).

f. Each payment order that a financial institutionaccepts as an originator’s, intermediary, or ben-eficiary’s bank with respect to a funds transferin the amount of $3,000 or more (31 CFR103.33(e)).

g. A list of each individual, including the name,address and account number, who holds adeposit account for which the bank has beenunable to secure a taxpayer identification num-ber from that person after making a reasonableeffort to obtain the number (31 CFR103.34(a)(1)(ii)).

h. Each document granting signature authorityover each deposit account (31 CFR 103.34(b)(1)).

i. Each statement, ledger card or other record ofeach deposit account showing each transactioninvolving the account, excepting those itemslisted in 31 CFR 103.34(b)(3) (31 CFR103.34(b)(2), (3) and (4)).

j. Each document relating to a transaction of morethan $10,000 remitted or transferred to a person,account or place outside the United States (31CFR 103.34(b)(5) and (6)).

k. Each check or draft in an amount in excess of$10,000 drawn on or issued by a foreign bankwhich the domestic bank has paid or presentedto a nonbank drawee for payment (31 CFR103.34 (b)(7)).



Y N Comments

l. Each item relating to any transaction of morethan $10,000 received on any one occasiondirectly and not through a domestic financialinstitution, from a bank, broker or dealer inforeign exchange outside the United States(31 CFR 103.34(b)(8) and (9)).

m. Records prepared or received by a bank in theordinary course of business which would beneeded to reconstruct a demand deposit accountand to trace a check in excess of $100 depositedin such demand deposit account (31 CFR103.34(b)(10)).

n. A record containing the name, address andtaxpayer identification number, if available, ofany person presenting a certificate of deposit forpayment, as well as a description of the instru-ment and the date of the transaction(31 CFR 103.34(b)(12).

o. Each deposit slip or credit ticket reflecting atransaction in excess of $100 or the equivalentrecord for direct deposit or other wire transferdeposit transactions. The slip or ticket shallrecord the amount of any currency involved(31 CFR 103.34(b)(13)).



Internal Audit/Independent Review

Regulation H, Section 208.14, requires thatfinancial institutions provide for independent

testing for BSA compliance to be conducted bybank personnel or an outside party (Refer toBSA Manual—Regulation H).

Y N Comments

14. Review the institution’s written internal audit/independent review procedures and determine thatthe internal audit function provides for review forcompliance with the BSA and related anti-moneylaundering laws and regulations. If the institutiondoes not have an internal audit function, determinethat a program of management reviews or selfaudits has been established which include therequirements of the BSA. Do the audit procedures/independent reviews:

a. confirm the integrity and accuracy of the systemsfor the reporting of large currency transactions?

b. include a review of tellers’ work and Forms4789 and 4790?

c. confirm the integrity and accuracy of the insti-tution’s recordkeeping activities, as detailed inWorkprogram procedure 12?

d. encompass a test of adherence to the in-houserecord retention schedule, as detailed in Work-program procedure 13?

e. include steps necessary to ascertain that theinstitution is maintaining documentation ofexempt customers as required by the regulations?

f. provide a test of the reasonableness of theexemptions granted? (non-interim)

g. include steps necessary to ascertain that theinstitution is conducting an ongoing trainingprogram?

h. require the auditor to ascertain that the institu-tion has filed a Report of Foreign Bank Finan-cial Accounts, (Treasury Form 90-22.1) declar-ing interests in foreign financial accounts?



Y N Comments

i. include steps necessary to ascertain that theinstitution has procedures in place for obtainingand maintaining required information for thesale/purchase of monetary instruments for cashin amounts between $3,000 and $10,000 inclu-sive, and that appropriate customer identifica-tion measures are in place?

15. If there were any violations or deficiencies notedfrom the previous examination, has your reviewdetermined that the violations or deficiencies havebeen corrected?

Advisory #3

Evidence of violations of, or noncompliancewith, specific provisions of the BSA may beindicative of a systemic failure of the internalaudit program. As you complete the followingexamination procedures, you must determinewhether apparent violations were caused bymisinterpretations, oversight, or technical mat-ters rather than by an inadequate complianceprogram. If you feel the institution’s complianceprogram is inadequate, you may want to enhance

your BSA examination (i.e. use a larger sam-pling of transactions).

Education

Regulation H, Section 208.14 requires that finan-cial institutions provide BSA training for appro-priate personnel, including, but not limited to,tellers, customer service representatives, lendingofficers, private and personal banking officersand all other customer contact personnel (Referto BSA Manual—Regulation H).

Y N Comments

16. Review the institution’s program for educatingappropriate employees regarding the BSA to deter-mine if the established program includes thefollowing:

a. Reporting of large currency transactions.

b. Exemptions from large currency transactionreporting.

c. Identifying and reporting of suspicious activityor alleged criminal conduct.

d. Record retention requirements.

e. Sale/purchase of monetary instruments.

f. Review of internal policies/procedures.



Y N Comments

g. Examples of money laundering cases and themethods in which activities can be detected/resolved/reported.

h. Overview of the different forms that moneylaundering can take (deposit accounts, wiretransfer loans, etc.).

i. Wire (fund) transfer activity.

j. ‘‘Know Your Customer’’ procedures.

17. Review the scope and frequency of training meet-ings to determine what importance managementplaces in ongoing education and training. In review-ing the institution’s policies and procedures, deter-mine the:

a. Appropriateness of the scope and frequency.

b. Level of compliance.

18. Question the BSA compliance individual(s) andother operations personnel (i.e., tellers, platformofficers, branch managers) to determine whetherthey are sufficiently knowledgeable concerning theBSA and operating procedures to assure compliance.Does this training address money launderingschemes?

19. Interview personnel from other areas of the institu-tion which deal in currency such as trust, loan andinternational departments, private banking units,discount brokerage units, cash control centers andspecialized foreign exchange units to determine thatthey are knowledgeable regarding the BSArequirements, possible money laundering schemes,and the identification of suspicious or unusualactivities. List in the ‘‘Comments’’ section of thispage the personnel interviewed in both Workpro-gram procedures number 18 and 19, and documenttheir level of knowledge of BSA-related issues andhow they acquired this knowledge.

20. If there were any violations or deficiencies regard-ing education noted during the previous examina-tion, has your review determined that the violationsor deficiencies have been corrected?



Anti-Money Laundering Program

Advisory #4

A financial institution’s compliance with theBSA should include a thorough understandingof money laundering and its implication on the

institution. In the review of the BSA complianceprogram, the examiner should determine whetherwritten policies and procedures have been imple-mented covering the detection and prevention ofmoney laundering activities. If no such policiesand procedures exist, make reference to this inthe report of examination.

Y N Comments

21. If applicable, do the anti-money laundering policiesaddress the following:

a. define money laundering in its different forms(e.g. placement, layering, integration).

b. provide compliance with BSA and related anti-money laundering laws and regulations.

c. establish a ‘‘Know Your Customer’’ program.

d. identify high risk activities, businesses andforeign countries (those commonly associatedwith money laundering).

22. If applicable, do the anti-money laundering policiesextend to the following institution operations:

a. retail operations.

b. trust department.

c. loan department.

d. private banking operation. (Refer toBSAManual—Private Banking.)

e. sale of monetary instruments.

f. wire transfer room.

g. teller and currency operations.

h. safe deposit box activity.

i. international department.

j. correspondent banking area.

k. discount brokerage department.

l. subsidiary activities (i.e. money transmitter/check cashier).

m. section 20 operations.



Y N Comments

23. Determine whether management has implemented ahigh level of internal controls to minimize the riskof money laundering. These controls should include,but not be limited to, the following:

a. money laundering detection procedures

b. identification and monitoring of non-bank finan-cial institutions that are depositors of the insti-tution and that engage in a high volume of cashactivity (i.e. money transmittors and check cash-ing businesses).

c. periodic account activity monitoring.

d. internal investigations, monitoring and report-ing of suspicious transactions.

Exemptions

Advisory #5

As of July 1, 2000, new Treasury exemptionprocedures allowing financial institutions to

exempt transactions of certain businesses fromthe requirement to report transactions in cur-rency in excess of $10,000 (Currency Transac-tion Report (CTR)) became fully effective. AfterJuly 1, 2000, only exemptions granted pursuantto the new exemption procedures will be valid.

Y N Comments

24. Has the institution designated any ‘‘exempt per-sons’’ as defined in the regulations?

If no, the examiner should waive the following stepsand proceed to the next section of the Work Pro-gram. If yes, answer the following questions:

25. Does the bank have sufficient procedures related toexemptions?

26. Does the bank have adequate and knowledgeablepersonnel sufficient to maintain the exemptionprocess?

27. Does the bank maintain appropriate and sufficientdocumentation to support each exemption?


Bank Secrecy Act Manual July 2000Page 13

Y N Comments

Answer the following questions with respect to eachexempt person. If the bank has more than 50 exemptpersons, a reasonable sample should be selected.

28. Does the bank take appropriate steps to adequatelydetermine and verify the eligibility of exemptions?

29. Do all Phase I exemptions meet the establishedcriteria?

a. Bank

b. Government Agency

c. Listed Business

d. Subsidiary of a Listed Business

30. Do all Phase II ‘‘non-listed business’’ exemptionsmeet the established criteria?

a. Maintained a transaction account with the bankfor at least 12 months?

b. Frequently engaged in currency transactions inexcess of $10,000?

c. Is incorporated or organized under US or Statelaw or is registered and is eligible to do businesswithin the US or a State?

31. Do all Phase II ‘‘payroll customer’’ exemptionsmeet the established criteria?

a. Maintained a transaction account with the bankfor at least 12 months?

b. Operates a firm that regularly withdraws morethan $10,000 in order to pay its US employeesin currency?

c. Is incorporated or organized under US or Statelaw or is registered and is eligible to do businesswithin the US or a State?

32. For each exempt person, has the bank filed a‘‘Designation of Exempt Person’’ form completelyand within 30 days of the first reportable transactionthat was exempted?


July 2000 Bank Secrecy Act ManualPage 14

Y N Comments

33. For Phase II exemptions, has the bank filed a‘‘Designation of Exempt Person’’ biennially byMarch 15 beginning the second calendar yearfollowing the original designation?

34. Does the bank review and verify each exemption atleast annually?

35. Are the volumes, amounts and frequency of thelarge currency transactions for each exempt personconsistent with what is normal and expected andcommensurate with lawful activity?

36. Does the bank have a system to monitor thecurrency transactions of exempt persons for suspi-cious activity?

37. Is the monitoring system adequate to identify sus-picious activity?

38. Has the bank’s internal audit department reviewedthe exemption process?

39. Have there been any outstanding issues involvingexemptions and if so, have they been resolved?


Bank Secrecy Act Manual July 2000Page 15

Advisory #6

If the answers to Workprogram procedures 24through 39 are substantially unsatisfactory, you(or you may direct the institution to do so)should perform Workprogram procedures 40 to42. As an alternative, you may wish to perform

a sampling of the Workprogram procedures 40to 42 and then instruct the institution to com-plete the remainder of the review for thesetwo Workprogram procedures. If answers to 24through 39 are generally satisfactory, you mayproceed to the Know Your Customer section.

Y N Comments

40. Review of Statements of Accounts

a. Obtain customer statements of account for asixty day period for all exempted customers.

b. Review customer statements of account to deter-mine whether any daily deposit or withdrawalamounts (either individual amounts or aggre-gated amounts) exceed $10,000. (The amountson the statements of account may include cashand/or checks).



Advisory #7

If a customer’s cash deposit or withdrawalamounts on the statements of account do notexceed $10,000 on a regular and frequent basis(refer to BSA Manual—Exemption Handbookfor meaning of ‘‘regular and frequent’’) thecustomer does not qualify for an exemption

status. (Note that the $10,000 limitation refers tocash only. The information may not be readilyavailable when reviewing the statement ofaccount). Discuss the customer’s status withinstitution management. Workprogram proce-dures 41 and 42 regarding Review of Depositsand Withdrawals is not required for these ineli-gible customers.

Y N Comments

41. Review of Deposits

a. Obtain a hard copy of deposit tickets for cus-tomer accounts to be tested. Actual deposittickets may be available if the institution doesnot mail the deposit tickets back to the cus-tomer. If actual deposit tickets are not available,request that the institution print a hard copy ofdeposit tickets from microfilm or microfiche.

b. Determine whether the cash portion of thedeposits is sufficient to qualify the customer foran exemption based upon the Internal RevenueService’s ‘‘regular and frequent’’ requirementfor a deposit exemption.

c. Determine whether established dollar limits arereasonable by reviewing the customer’s cashdeposit activity. Discuss any unreasonable dol-lar limits with institution management.



Advisory #8

Exemption procedures permit unilateral exemp-tion withdrawals for payroll purposes from anexisting account by an established depositorwho is a United States resident and operates afirm that regularly withdraws more than $10,000

in order to pay its employees in currency. Theexemption is limited to withdrawals by employ-ers that actually pay employees with the cur-rency withdrawn. The exemption is not avail-able to employers who pay employees by checkand then offer a check cashing service to theemployees.

Y N Comments

42. a. Determine the method used by exempt custom-ers to withdraw currency in excess of $10,000.

• If checks payable to ‘‘cash’’ are used, reviewcanceled checks cleared during the currentstatement cycle and identify those items andamounts.

• If counter currency withdrawal tickets orcounter checks are used, review tickets orchecks and identify those items and amounts.

b. Determine whether the cash portion of thewithdrawals is sufficient to qualify the customerfor an exemption based upon Treasury’s ‘‘regu-lar and frequent’’ requirement for a withdrawalexemption.

c. Determine whether established dollar limits arereasonable by reviewing the customer’s cashwithdrawal activity. Discuss any unreasonabledollar limits with institution management.



Advisory #9

Department of the Treasury Administrative Rul-ing 88-3 states that banks may not exempt ‘‘cashback’’ transactions (transactions involving thedeposit of checks where a portion of the depositis remitted in cash) from the CTR reportingrequirements. Therefore, cash received by thecustomer on ‘‘cash-back’’ transactions shouldnot be included in the exemption limit review.(Refer toBSA Manual—Administrative Rulings).

Know Your Customer Policy

Advisory #10

While ‘‘Know Your Customer’’ policies andprocedures are not currently required by regula-tion, institutions should strongly be encouragedto develop and maintain such policies and pro-cedures (Refer toBSA Manual—Know YourCustomer Policy Standards).

Y N Comments

43. Does the bank have policies and procedures whichrequire that ‘‘reasonable efforts’’ be made to ascer-tain the true identity of individual customers and/orthe stated business purpose of each commercialenterprise with whom the bank conducts business(Refer to BSA Manual—Know Your CustomerPolicy Standards)?

44. Does the institution’s ‘‘Know Your Customer’’policy include the following, when opening anaccount:

Personal Accounts

a. Procurement of proper identification (e.g., driv-er’s license with photograph, U.S. passport,etc.)?

b. Consideration of customer’s residence or placeof business?

c. Consideration of source of funds/wealth used toopen the account?

d. Check with service bureau, if applicable, forundesirable situations involving customer (kit-ing, NSF, etc.)?

Business Accounts

e. Verification of legal status of business (i.e., soleproprietorship, partnership, etc.)?

f. Verification of name of business, if applicable,with a reporting agency?

g. Verification that business exists and is conduct-ing the stated business?



Y N Comments

h. For foreign business accounts, is there proofthat the business is registered in the country oforigin (e.g. articles of incorporation, etc.)?

i. Procurement of the following information forlarge commercial accounts:• Financial statement?• Description of customer’s principal line of

business?• Description of business operations, i.e., retail

vs. wholesale?

45. Does the bank’s employee education training pro-gram provide detailed instruction in the identifica-tion and reporting of ‘‘suspicious’’ transactions? Ano answer may indicate a training deficiency andshould be so noted in question #16 (Refer toBSAManual—Suspicious Activities).

46. Does the bank have adequate ongoing monitoringsystems in place to identify ‘‘suspicious’’ transactions(structuring, concentration accounts, transactionsinconsistent with the nature of a customer’s statedbusiness purpose, unusual wire transfer activities)?

47. Does the bank have adequate testing of its systemsto identify suspicious transactions?

48. If the institution uses fictitious names for customerson the general ledger or other institution docu-ments, does the institution maintain files containingthe customers’ real names and other identifyinginformation and does the institution have knowl-edge of these customers’ activities (The use offictitious names is customarily found in private orforeign banking)?



Currency Flows and Reporting of Large Cash Transactions

Y N Comments

49. Review the cash totals shipped to and received fromthe Federal Reserve Bank, correspondent banks, orbetween branch offices for a reasonable period oftime (generally no less than three months). Youshould determine, through discussion with manage-ment, the cause of any unusual activity noted (i.e.material variance in totals of currency shipped orreceived or large denomination currency exchanged).You should also determine if the volume of CTRfilings during the period is consistent with anychanges in the patterns of cash activity. (Refer toBSA Manual—Databases).

Advisory #11

The sample size of CTRs you should reviewwill depend upon several factors such as thesize and location of the institution, the detailand accuracy of reports, and your comfort level

with the institution’s internal control proce-dures. If the institution has an automated systemfor identifying large currency transactions,you should proceed to Workprogram pro-cedure 50. If not, proceed to Workprogramprocedure 51.

Y N Comments

50. Ascertain whether the bank has an automated sys-tem in place to capture cash transactions (individualand/or multiple transactions) in excess of $10,000on the same business day by or on behalf of thesame individual, or by account. Determine whetherthe internal audit/independent review has ade-quately tested the accuracy and validity of theautomated large transaction identification systemand that the system is comprehensive with regard toall points of cash entry and exit. Determine whetherthe discount brokerage, private banking, trust, orany other departments within the bank engage incurrency transactions subject to the regulations, andif so, that aggregation systems cover such activities.If the system has not been verified, proceed toADVISORY #13. You should also perform theprocedures contained in Workprogram procedures52 and 53.



Y N Comments

51. If the bank does not make use of an automated largetransaction identification or aggregation system,does the internal audit program or other indepen-dent review include a sample test check of tellers’cash proof sheets or tapes to determine if large cashtransactions are being reported? If not, proceed toADVISORY #13. You should also perform theprocedures contained in Workprogram procedures52 and 53.

52. Review a sample of completed CTRs, whether hardcopy or from computer generated filings, to deter-mine that:

a. CTRs are properly completed in accordancewith Internal Revenue Service instructions.

b. Transaction amounts are consistent with thetype and nature of business or occupation of thecustomer.

c. CTRs are filed for large cash transactions iden-tified by tellers’ proof sheets, automated largecurrency transaction system, or other type ofaggregation system, unless an exemption existsfor the customer. However, CTRs must be filedfor customers who exceed their exemptionlimits.

d. CTRs are filed within 15 calendar days after thedate of the transaction (25 days if magneticallyfiled).

53. Review any correspondence received from theInternal Revenue Service relating to incorrect orincomplete CTRs and determine whether the insti-tution has taken appropriate corrective action.



Advisory #12

If the review of the bank’s handling of currencyflows and large cash transactions is satisfactory,proceed to the funds transfer section of theWorkprogram. If the review was not satisfac-tory, or deficient in any respect, proceed toADVISORY #13.

Advisory #13

If the bank’s internal audit/independent reviewhas not sufficiently tested the validity of theautomated or manual systems to identify largecurrency transactions (i.e. performed a test checkof tellers’ proof sheets for large cash transac-tions), the bank may be in violation of Regula-tion H, Section 208.14. The examiner in chargeshould be notified that the integrity of thereporting system for large currency transactionscannot be verified. Depending upon the circum-stances, the examiner in charge must choose oneof the following options:

• The examiner in charge may instruct thebank to perform a self-assessment of itscompliance with the reporting requirementsof BSA. Specifically, the bank must conducta review of its cash activities since the pre-vious examination ‘‘sufficient in scope’’ tosatisfy the examiner that no other violationsof the BSA have occurred. The scope of sucha review should include a detailed test checkof each teller’s cash proof sheets since theprevious BSA examination. The bank mustprovide a report to the examiner detailing thescope of the review (i.e. number of days ofteller’s work reviewed and the number oftellers reviewed) and the findings that resultfrom the review. (The report from the insti-tution should, at a minimum, include anypreviously unreported large currencytransactions.)

• Where you suspect willful nonreporting ofviolations and an attempt to cover up suchtransactions, then you should perform Work-program procedures 54 through 58.

Y N Comments

54. Review tellers’ cash proof sheets for suspectednonreporting of large currency transactions forperiods of time of suspected violations.

55. If the bank has an automated system in place tocapture individual or multiple cash transactions ofless than $10,000, review an appropriate sample oftransactions to ascertain the following information.

a. Evidence of structured transactions.

b. Evidence of ‘‘concentration accounts’’ (accountswhich have frequent cash deposits aggregatingless than $10,000 on any business day, andrelatively few transfers of large amounts out ofthe accounts, by check or wire).

c. Customers with frequent cash transactions ofless than $10,000 who have not provided taxidentification numbers.

d. Customers with frequent cash transactions thathave provided either a foreign address or postoffice box as an address or have requested thatthe bank hold monthly statements.

e. Other suspicious or unusual activities.



Y N Comments

56. If available, obtain copies of the following inter-nally generated reports for review:

a. Suspected Kiting Reports—These reports iden-tify excessive activity in accounts and should bereviewed for cash activity. (The account profileof an account used for money laundering can besimilar to that of an account used for checkkiting, i.e. high volume of activity, matchingdeposits and withdrawals, low average balancesin relation to activity.)

b. Demand Deposit Activity Reports—Thesereports cover all customer and employeeaccounts. They generally show daily balancesand accumulate deposits and withdrawals over a30-day period. Careful review will show accountsthat have changed, either in average balance orin numbers of transactions.

c. Large Transaction or Cash-In and Cash-OutReports—Most institutions prepare reports ofdeposits and withdrawals, either in cash or bycheck that exceed a certain amount that is lessthan the over $10,000 reporting requirement.Such reports can help identify customers whomay be structuring transactions to avoid CTRreporting or who have unusual or suspiciousactivity in their accounts.

d. Incoming and Outgoing Wire Transfer Logs—These logs can identify transfers of funds out ofthe country or to remote banks, transfers fundedby cashier’s checks and/or money orders inamounts under the CTR filing threshold (over$10,000) and other suspicious patterns for non-customers as well as accountholders. Addition-ally, review incoming and outgoing facsimilelogs for payment instructions related to fundstransfers.

e. Loans Listed by Collateral—Review for ‘‘sig-nificant’’ loans collateralized by cash (certifi-cates of deposit, bank accounts). Review situa-tions in which collateral was received by fundstransfer and the collateral, such as certificates ofdeposits, are from offshore institutions. Inquireas to the purpose and terms of loans securedlargely with cash and whether payments onsuch loans are often received in cash, if at all.Look for loans from which the proceeds areimmediately used to purchase CD’s.



Y N Comments

57. Obtain copies of the bank statement for the institu-tion’s major correspondent bank for a period of atleast two months, together with reconcilement sheetsand general ledger sheets covering the same period.Review large transactions reflected on either theinstitution’s or the correspondent’s records to deter-mine its nature, as indicated by copies of credit ordebit advices, or general ledger tickets. Note thefollowing items and determine the reason(s) forsuch transactions:

a. Advice of credit from a correspondent bank thatcash has been transmitted to the correspondentfor credit to the account of the customer initi-ating the cash shipment on the books of theinstitution under examination.

b. Cashier checks, money orders or similar instru-ments drawn on other institutions in amountsunder $10,000, more than one of which havebeen deposited into the same deposit account,or into accounts controlled by the same person,at the institution under examination, and possi-bly transferred elsewhere in bulk amounts.Traces of such transactions may be found incorrespondent account statements, customeraccount records or in telex records. Note whetherthe instruments under $10,000 are sequentiallynumbered.

58. Review incoming mail of the institution to deter-mine if the institution is receiving currency depositsvia mail, courier services or internal deliveries.Does the institution have procedures to ensure thatCTRs are filed and proper records are maintained?



Funds Transfers (Refer toBSA Manual—Wire Transfer Operations)

Advisory #14

If this Workprogram is being used for institu-tions other than commercial banks, foreignbranches, Edge Act corporations and agreement

corporations, refer to 31 CFR 103.33 (e) and (f)for the applicable requirements. Also, a copy ofthe new wire transfer rules is located in the BSARegulations 31 CFR 103.11 and 103.33.

Y N Comments

59. Is there adequate separation of duties or compen-sating controls to ensure proper authorization forsending and receipt of transfers, correct posting toaccounts and an audit trail of activities?

60. Does the institution accept cash for funds transfersand, if so, does the institution require identification,maintain documentation, and file CTRs, ifapplicable?

61. Does the institution send or receive fund transfersto/from financial institutions in other countries,especially countries with strict privacy and secrecylaws, and, if so, are amounts, frequency, and coun-tries of origin/destination consistent with the natureof the business or occupation of the customer?

62. Does the institution have procedures to monitor foraccounts with frequent cash deposits and subse-quent wire transfers of funds to a larger institutionor out of the country?



Responsibilities for Originating Banks

Y N Comments

63. For funds transfer originations of $3,000 or more,does the institution retain the following records(this information may be with the payment order orin the institution’s files if the originator has anestablished relationship with the institution1) (31CFR 103.33(e)(1)(i))

a. The name and address of the originator;

b. The amount of the funds transfer;

c. The date of the funds transfer;

d. Any payment instructions received from theoriginator with the payment order;

e. The identity of the beneficiary’s bank; and

f. As many of the following items as are receivedwith the payment order:2

(1) The name and address of the beneficiary;

(2) The account number of the beneficiary; and

(3) Any other specific identifier of thebeneficiary.

64. For funds transfers of $3,000 or more for origina-tors that do not have an established relationshipwith the institution,1 in addition to the requirementsin question 63:

a. If the payment order is made in person, does theinstitution verify the required noncustomer iden-tification3 and retain a record of this verifiedinformation? [31 CFR 103.33(e)(2)(i)]

1. A customer has an established relationship with a financial institution if the customer has a loan, deposit,or other asset account, or is a person with respect to which the institution has on file the person’s name andaddress, as well as taxpayer ID number, or, if none, alien identification number or passport number and countryof issuance, and to which the institution provides financial services relying on that information.

2. For funds transfers effected through the Federal Reserve’s Fedwire funds transfer system, only one of theitems is required to be retained, if received with the payment order, until such time as the bank that sends theorder to the Federal Reserve Bank completes its conversion to the expanded Fedwire message format.

3. Information required from noncustomers includes the name and address; the type of identificationreviewed; and the number of the identification document (e.g., driver’s license); as well as a record of theperson’s taxpayer identification number (e.g.,social security or employer identification number) or, if none, alienidentification number or passport number and country of issuance; or a notation in the record of the lack thereof).



Y N Comments

b. If the institution has knowledge that the personplacing the payment order is not the originator,does the institution obtain and retain a record ofthe originator’s taxpayer identification number(e.g., social security or employer identificationnumber) or, if none, alien identification numberor passport number and country of issuance,if known by the person placing the order, ora notation in the record of the lack thereof?(31 CFR 103.33(e)(2)(i)) Does the institutionverify the identity of the person placing theorder on behalf of a third party?

c. If the payment order is not made in person, doesthe institution obtain and retain a record ofname and address of the person placing thepayment order, as well as the person’s taxpayeridentification number (e.g., social security oremployer identification number) or, if none,alien identification number or passport numberand country of issuance, or a notation in therecord of the lack thereof, and a copy or recordof the method of payment (e.g., check or creditcard transaction) for the funds transfer? (31CFR 103.33(e)(2)(ii))

65. Is the information that the institution must retain fororiginators retrievable by reference to the name ofthe originator? If the originator is an establishedcustomer of the institution and has an account usedfor funds transfers, is the information also retriev-able by account number?4 (31 CFR 103.33(e)(4))

66. For transmittals of funds of $3,000 or more, doesthe institution include in the transmittal order5 (31CFR 103.33(g)(1)):

a. The name and, if the payment is orderedfrom an account, the account number of thetransmittor?

b. The address of the transmittor, except for trans-mittal orders through Fedwire until such time asthe bank that sends the order to the FederalReserve Bank completes its conversion to theexpanded Fedwire format;

4. Account number being the actual account used in the funds transfer transaction at the time of the transfer.If the institution has merged with another financial institution, the transfer must be retrievable by the old accountnumber.

5. See 31 CFR Part 103, Section 103.11 for definitions of terms.



Responsibilities for Intermediary Banks

Y N Comments

c. The amount of the transmittal order;

d. The date of the transmittal order;

e. The identity of the recipient’s financial institu-tion;

f. As many of the following items as are receivedwith the transmittal order:2

(1) The name and address of the recipient;

(2) The account number of the recipient; and

(3) Any other specific identifier of the recipi-ent; and either the name and address ornumeric identifier of the transmittor’s finan-cial institution.

67. For funds transfers of $3,000 or more, if theinstitution is acting as an intermediary bank, doesthe institution retain either the original or a micro-film, other copy, or electronic record of the paymentorder? (31 CFR 103.33(e)(1)(ii))

68. For transmittals of funds of $3,000 or more, doesthe institution include in the transmittal order to thenext receiving financial institution the following, ifreceived from the sender4 (31 CFR 103.33(g)(2)):

a. the name and account number of the transmittor;

b. The address of the transmittor, except for trans-mittal orders through Fedwire until such time asthe bank that sends the order to the FederalReserve Bank completes its conversion to theexpanded Fedwire format.

c. The amount of the transmittal order;

d. The date of the transmittal order;

e. The identity of the recipient’s financialinstitution;


4. Account number being the actual account used in the funds transfer transaction at the time of the transfer.If the institution has merged with another financial institution, the transfer must be retrievable by the old accountnumber.



Responsibilities for Beneficiary Banks

Y N Comments

f. As many of the following items as are receivedwith the transmittal order:2

(1) The name and address of the recipient;

(2) The account number of the recipient; and

(3) Any other specific identifier of the recipi-ent; and either the name and address ornumeric identifier of the transmittor’s finan-cial institution.

69. For each payment order of $3,000 or more that aninstitution accepts as a beneficiary’s bank, does theinstitution retain either the original or a microfilm,other copy, or electronic record of the paymentorder? (31 CFR 103.33(e)(1)(iii))

70. In addition to the requirements in question 68, forpayment orders of $3,000 or more received for abeneficiary that does not have an established rela-tionship with the institution:1

a. If the proceeds are delivered in person to thebeneficiary or its representative or agent, doesthe beneficiary’s bank verify the identity of theperson receiving the proceeds and obtain andretain a record of that information?3 (31 CFR103.33(e)(3)(i))

1. A customer has an established relationship with a financial institution if the customer has a loan, deposit,or other asset account, or is a person with respect to which the institution has on file the person’s name andaddress, as well as taxpayer ID number, or, if none, alien identification number or passport number and countryof issuance, and to which the institution provides financial services relying on that information.


3. Information required from noncustomers includes the name and address; the type of identificationreviewed; and the number of the identification document (e.g., driver’s license); as well as a record of theperson’s taxpayer identification number (e.g.,social security or employer identification number) or, if none, alienidentification number or passport number and country of issuance; or a notation in the record of the lack thereof).



Y N Comments

b. If the institution has knowledge that the personreceiving the proceeds is not the beneficiary,does the institution obtain and retain a record ofthe beneficiary’s name and address, as well asthe beneficiary’s taxpayer identification number(e.g., social security or employer identificationnumber) or, if none, alien identification numberor passport number and country of issuance, ifknown by the person receiving the proceeds, ora notation in the record of the lack thereof? (31CFR 103.33(e)(3)(i)) Does the institution verifythe identity of the individual receiving the fundson behalf of a third party?

c. If the proceeds are delivered other than inperson, does the institution retain a copy of thecheck or other instrument used to effect pay-ment, or the information contained thereon, aswell as the name and address of the person towhich it was sent? (31 CFR 103.33(e)(3)(ii))

71. Is the information that the institution must retain forbeneficiaries retrievable by reference to the name ofthe beneficiary? If the beneficiary is an establishedcustomer of the institution and has an account usedfor funds transfers, is the information also retriev-able by account number? (31 CFR 103.33(e)(4))



Purchases/Sales of MonetaryInstruments

Section 103.29 of the BSA requires that finan-cial institutions maintain certain informationregarding sales in currency of bank checks ordrafts, cashier’s checks, money orders or trav-eler’s checks for $3,000 to $10,000, inclusive.(Effective October 17, 1994, financial institu-tions are no longer required to maintain thenecessary information on a ‘‘monetary instru-ment log.’’)

Advisory #15:

If the institution’s stated policy is not to sellmonetary instruments for cash to nondeposit-account-holders in amounts between $3,000 and

$10,000 inclusive, and where the institutionrequires deposit-holders to buy monetary instru-ments only through the use of their depositaccounts (e.g. debit memo, check, etc.), theinstitution is not required to separately maintainthe information pursuant to Section 103.29.However, the institution must have adequatecontrols and proper training in place to ensurethat if a transaction is completed that inadvert-ently does not comply with the stated policy (i.e.teller mistakenly sells $5,000 in traveler’s checksto nondeposit-account-holder for cash), therequired information will be properly recordedon whatever records or systems that the bankchooses (e.g. on the copy of the instrumentpurchased). If the institution’s policies areadequate and therefore the institution does notmaintain a log, you may proceed to ADVI-SORY #18.

Y N Comments

72. Do the financial institution’s records include thefollowing required information for purchasers whohave deposit accounts (as defined in Section 103.11)with the institution:

a. The name of the purchaser.

b. Date of purchase.

c. The type(s) of instrument(s) purchased.

d. The serial number(s) of each of the instru-ment(s) purchased.

e. The dollar amount(s) of each of the instru-ment(s) purchased in currency.

f. Method of verification of identity (either at timeof purchase or when deposit account opened).

73. Do the financial institution’s records include thefollowing required information for purchasers whodo not have deposit accounts with the institution:

a. The name and address of the purchaser.

b. The social security or alien identification num-ber of the purchaser.

c. The date of birth of the purchaser.



Y N Comments

d. The date of purchase.

e. The type(s) of instrument(s) purchased.

f. The serial number(s) of each of the instru-ment(s) purchased.

g. The dollar amount(s) of each of the instru-ment(s) purchased.

h. Method of verifying identity of purchaser andspecific identifying information (e.g. State ofissuance and number of driver’s license).

74. Are the financial institution’s records retrievable,upon request from the Treasury, within a reasonableperiod of time.

75. Does the institution have a system for capturingmultiple sales of monetary instruments in one day,in amounts totalling $3,000 or more?

76. Does the institution use manual or automated sys-tems for identifying cash sales of monetary instru-ments? Note type of system used.



Advisory #16

If the review of the records of the purchases/sales of monetary instruments shows unusual orsuspicious patterns of purchases/sales activity

that might be associated to money laundering,perform Workprogram procedures 77 through79. If not, proceed to Workprogram proce-dure 80.

Y N Comments

77. If the institution uses manual systems, proceed toWorkprogram procedure 79. If the institution usesautomated systems, proceed to Workprogram pro-cedure 78.

78. If the institution relies upon automated systems foridentifying such transactions, does the internalaudit/independent review adequately test the accu-racy and validity of the cash purchases/sales iden-tification system and is the system comprehensivewith regard to all points of purchase/sale? If theinternal audit/independent review has verified theintegrity of the system, then stop. If the integrity ofthe automated system has not been verified, proceedto Workprogram ADVISORY #17.

79. If the institution relies upon manual systems foridentifying such transactions, do the institution’srecords provide an audit trail sufficiently detailed toidentify the method of payment for all purchases/sales of monetary instruments?

a. Does the internal audit/independent reviewinclude a test check of teller’s proof sheets tothe original record of purchases/sales to deter-mine that required information is properly ob-tained and retained?

b. If the integrity of the manual system is verifiedby internal audit/independent review and en-sures that all purchases/sales have been prop-erly documented, then stop. If the integrity ofthe manual system has not been verified, pro-ceed to Workprogram ADVISORY #17.



Advisory #17

If the institution’s internal audit/independentreview has not sufficiently tested the validity ofthe automated or manual systems for identifica-tion of cash sales, the examiner in charge shouldbe notified that internal audit or control may beinadequate and the institution may be in viola-tion of Regulation H, Section 208.14. Depend-ing upon the circumstances, the examiner incharge may request that the institution conduct areview of all sales of monetary instrumentssince the previous examination and indicate in areport to the examiner the source of payment foreach purchase/sale between $3,000 and $10,000.A plan for implementation of adequate internalsafeguards to assure proper record retentionshould also be presented.


Advisory #18

The U.S. Department of Treasury’s Office ofForeign Assets Control (‘‘OFAC’’) administerslaws that impose economic sanctions againstforeign countries to further U.S. foreign policyand national security objectives. OFAC is alsoresponsible for making regulations that restricttransactions by U.S. persons or entities(including banks), located in the U.S. or abroad,with certain foreign countries, their nationals or‘‘specially designated nationals.’’ OFAC regu-larly provides to banks, or banks may subscribeto certain databases or other informational pro-viders (including theFederal Register), currentlistings of foreign countries and designatednationals that are prohibited from conductingbusiness with any U.S. entity or individual (referto Section 1505 of theBSA Manual).

Y N Comments

80. Does the institution have policies and proceduresin place for complying with OFAC laws andregulations?

81. Does the U.S. bank maintain a current listing ofprohibited countries, entities and individuals?

82. Is the OFAC information disseminated to foreigncountry offices?

83. Are new accounts compared to the OFAC listingsprior to opening?

84. Are established accounts regularly compared tocurrent OFAC listings?

Payable Through Accounts

Advisory #19

If the institution being examined engages inpayable through account activities, refer to thesection of theBSA Manualdealing with suchaccounts.



bank secrecy act examination manual

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