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Bank Secrecy Act for Board Members. Agenda. Background and Purpose Money Laundering and Terrorist Financing BSA Program Requirements Risk Based Program Management Suspicious Activity Reports Board of Directors’ Responsibilities Penalties for Non-Compliance. Background and Purpose. - PowerPoint PPT Presentation


  • AgendaBackground and PurposeMoney Laundering and Terrorist FinancingBSA Program RequirementsRisk Based Program ManagementSuspicious Activity ReportsBoard of Directors ResponsibilitiesPenalties for Non-Compliance

  • Background and PurposeEnacted in 1970 to help law enforcement officials track and prevent the laundering of money obtained through illegal activitiesAmended many times over the yearsSignificant changes occurred with the passage of the USA PATRIOT Act in 2001.

  • Money LaunderingMoney laundering is the process by which one conceals the existence, illegal source, or illegal application of income, and then disguises that income to make it appear legitimate.The Three Stages of Money Laundering:PlacementLayeringIntegration

  • PlacementMoney is physically moved away from the scene of the crime and is first introduced into the banking system.Cash depositsCash purchase of monetary instrumentsCash loan paymentsCurrency exchange

  • LayeringMoney is transferred from account to account, institution to institution and country to country in an attempt to stymie investigators with a complex paper trail that loops through different legal jurisdictions.Wire TransfersElectronic Payments

  • IntegrationIntegration happens when washed cash becomes part of the legal economy and is effectively untraceable. Purchase and sale of real estate or other assetsObtaining business or personal loansLegitimate or illegitimate business operationsLegitimate or illegitimate charitable operations

  • Terrorist FinancingTerrorist financing is often described as reverse money laundering in that it takes money that comes from clean sources and channels it to the dirty purposes of terrorism.Sources of funds can include:Wealthy SympathizersFundraising at places of worship or cultural centersDrug TraffickingOfficial State Sponsorship (Sudan,Syria,Iran, Iraq)

    Money Laundering is often a critical component of terrorist financing.

  • Four Main Program RequirementsIndependent testing of BSA compliance.A specifically designated person or persons responsible for managing BSA compliance (BSA compliance officer).Training for appropriate personnel.A system of internal controls to ensure ongoing compliance

  • Independent TestingQualifiedIndependentTransaction TestingComprehensive work papers

  • BSA OfficerAuthorityAdequate StaffingOther ResourcesTraining

  • TrainingNew employees upon hireAll employees periodically (annually)Tailored to specific business linesEmployee accountability for complianceMaintenance of training records and materialsCoverage of credit union policies, procedures, processes, and new rules and regulations.Coverage of different forms of money laundering and terrorist financing Penalties for noncompliance with internal policies and regulatory requirements.

  • Internal ControlsMinimum Requirements:Customer/Member Identification ProgramCustomer/Member Due DiligenceSuspicious Activity ReportingCurrency Transaction ReportingCTR ExemptionsInformation Sharing under the USA Patriot ActMonetary Instrument RecordkeepingFunds Transfer RecordkeepingOffice of Foreign Assets Control (Can be a separate policy)

  • Internal ControlsBasic products and services offered:Electronic BankingFunds TransfersACH TransactionsLendingSale of Monetary Instruments

  • Internal ControlsExpanded products and services offered:Third Party Payment ProcessingForeign accounts/branches/servicesCorrespondent AccountsBrokered DepositsNon-Deposit Investment ProductsInsurancePrivate Banking

  • Internal ControlsAccounts offered to certain individuals and organizations:Nonresident Aliens and Foreign IndividualsNon-Bank Financial Institutions (MSBs)Professional Service Providers (Doctors, Attorneys, Accountants, Real Estate Brokers)Non-Governmental Organizations and CharitiesBusiness Entities (Domestic and Foreign)Cash-Intensive Businesses

  • Risk Assessment ConsiderationsRisk assessment not requiredExaminers will complete one if the credit union does notTell your own storyBSA program should be based on the risk assessment

  • Risk Assessment ComponentsAssess the following areas:Products and ServicesMembersGeographic LocationsChange as new products and services are introduced, strategic plans change, or field of membership changes.Periodic updatingAddress risks factors outlined in the FFIEC Exam Manual appendix J

  • Risk Assessment ConsiderationsThe risk assessment should answer the following questions:What types of products and services does the credit union offer?Who is using them?Where is the potential exposure to money laundering?What steps have been taken to mitigate risk?

  • Suspicious Activity ReportsCredit unions are required to file a SAR if the institution knows or suspects that a transaction: Involves illegal activityIs designed to evade BSA regulationsHas no business or apparent lawful purpose

    Reporting Limits Insider abuse in any amountAggregate transactions of $5,000 or more when a suspect can be identifiedAggregate transactions of $25,000 or more regardless of a potential suspect

  • SAR ExamplesInsufficient or suspicious member informationActivity inconsistent with the members businessUnusual cash transactionsUnexpected or frequent funds transfersAvoiding reporting or record keeping requirements (structuring)

  • Board of Directors ResponsibilitiesApprove the BSA Program annuallyAppoint a BSA OfficerReview the BSA Risk Assessment as applicableReview periodic BSA program updatesEnsure BSA officer has adequate staffing and resourcesReview reports of filed Suspicious Activity ReportsChampion policy and procedure

  • For the Credit UnionCivil Money Penalties:Failure to file CTRs - $25,000 to $100,000 per violationFailure to file SARs - $25,000 to $100,000 per violationCompliance Program violations - $25,000 per dayRecord-keeping violations - $1,000 per violationPattern of Negligence - $50,000Negligence - $500 per violationStructuring Dollar amount involved in transactions

  • For the Credit UnionRegulator Citations and Restrictions:Cease & Desist ordersDelay or rejection of new applicationsRevocation of federal deposit insurance coverage

  • For IndividualsGenerally: $250,000 and/or five years in prison for willful violationsIf conducted to facilitate other criminal acts: $500,000 or ten years in prison

  • Heather LineCompliance SpecialistUtah Credit Union [email protected]