Top 10 Things a New BSA Officer Must Know

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Top 10 Things a New BSA Officer Must Know

Agenda1. FinCEN2. FFIEC BSA/AML

Examination Manual3. Four Pillar of a

BSA/AML Compliance Program

4. Risk Ranking5. CIP vs. CDD and

EDD

6. Currency Transaction Reports

7. Structuring8. Suspicious Activity

Reports9. Monetary Instrument

Log10.Funds Transfers

1. FinCEN• The U.S. Department of the Treasury

established the Financial Crimes Enforcement Network in 1990 to provide a government-wide multi-source financial intelligence and analysis network.

• The organization's operation was broadened in 1994 to include regulatory responsibilities for administering the Bank Secrecy Act, one of the nation's most potent weapons for preventing corruption of the U.S. financial system.

FinCEN• FinCEN’s mission is to enhance U.S.

national security, deter and detect criminal activity, and safeguard financial systems from abuse by promoting transparency in the U.S. and international financial systems.

• http://www.fincen.gov/

FinCEN• Statutes and Regulations• Bank Secrecy Act Forms and Filing

Requirements• Reports and Publications

– SAR Activity Review, Trends, Tips and Issues– SAR Activity Review - By the Numbers– Suspicious Activity Reporting Guidance

2. FFIEC BSA/AML Examination Manual

• Federal Financial Institutions Examination Council– Board of Governors of the Federal Reserve– Federal Deposit Insurance Corporation– National Credit Union Administration– Office of the Comptroller of the Currency– Office of Thrift Supervision– State Liaison Committee

FFIEC BSA/AML Exam Manual• Most recent edition was published in

August 2007• Manual provides guidance to examiners

and used by BSA Officers to evaluate and design BSA/AML Compliance Programs

• Answers many questions regarding BSA/AML issues

FFIEC BSA/AML Exam Manual• Structure of Manual

– Introduction– Core Examination Overview and Procedures for Assessing the

BSA/AML Compliance Program– Core Examination Overview and Procedures for Regulatory

Requirements and Related Topics– Expanded Examination Overview and Procedures for an

Enterprise-wide Compliance Program and Other Structures– Expanded Examination Overview and Procedures for Products

and Services– Expanded Examination Overview and Procedures for Persons

and Entities– Appendices

FFIEC BSA/AML Exam Manual• Electronic Version

– http://www.ffiec.gov/bsa_aml_infobase/default.htm

• Print Format Version– http://www.ffiec.gov/bsa_aml_infobase/docu

ments/BSA_AML_Man_2007.pdf

3. Four Pillars of a BSA/AML Program

1. System of Internal Controls2. Independent Testing3. BSA Compliance Officer4. Training

• Tip: Read your bank’s BSA/AML Policies and Procedures

Internal Controls• Bank’s policies, procedures, and process

designed to limit and control risks and to achieve compliance with the BSA

• Level of sophistication of the internal controls should be commensurate with the size, structure, risks, and complexity of the bank

• FFIEC BSA/AML Exam Manual page 29

Independent Testing• Independent testing or audit should be

conducted by the internal audit department, outside auditors, or other qualified independent parties.

• Generally performed every 12 to 18 months

• Evaluate BSA/AML compliance program and management information systems

• FFIEC BSA/AML Exam Manual page 30

BSA Compliance Officer• Board of directors designate a qualified

individual• BSA compliance officer is responsible for:

– Coordinating and monitoring day-to-day BSA/AML compliance

– Manage adherence to the BSA• Must have appropriate level of authority

and resources to administer BSA/AML Program

• FFIEC BSA/AML Exam Manual page 32

Training• Appropriate personnel should be trained

in applicable aspects of the BSA• Training should be documented and

include:– Regulatory Requirements– Bank’s BSA/AML policies, procedures and

processes• Should be given annually and to new

employees during orientation• FFIEC Exam Manual page 33

4. Risk Ranking• BSA/AML Risk Assessment provides a

risk ranking of highest risks to the bank for money laundering

• Products and Services• Customers and Entities• Geographic Locations

• Read your bank’s BSA/AML Risk Assessment

5. Customer Identification Program

• The CIP is required by US PATRIOT Act• CIP is intended to enable the bank to form

a reasonable belief that it knows the true identity of a customer

• Account opening procedures should specify the identifying information that will be obtained from each customer

FFIEC BSA/AML Exam Manual page 47

Customer Identification Program

• Minimum information needed:– Name– Date of birth– Address– Identification number (usually taxpayer

identification number)

Customer Due Diligence• Enables bank to predict with relative

certainty the types of transactions in which a customer is likely to engage

• Helps determine the expected profile and risk ranking of a customer

• Forms the basis to determine if transaction activity is normal or suspicious

Enhanced Due Diligence• Additional information for customers that

pose high money laundering risks to the bank

• Examples of enhanced due diligence questions can be found on page 58 of the FFIEC BSA/AML Exam Manual

6. Currency Transaction Report

• Must file Currency Transaction Report (CTR) for each transaction in currency of more than $10,000 by, through, or to the bank within 15 days if filed manually or 25 days if filed electronically.

• FinCEN Form 104 must be kept for 5 years

• http://www.fincen.gov/forms/files/fin104_ctr.pdf

7. Structuring• Conducts or attempts to conduct one or

more transactions in currency in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading CTR filing requirements

• One of the most common issues facing a BSA Officer is structuring attempts

8. Suspicious Activity Report• Suspicious Activity Reports (SARs) are the

cornerstone of the BSA reporting system• Quality of SAR data is very important• Many examples of good SAR narratives

provided on FinCEN website• SAR Form -

http://www.fincen.gov/forms/files/f9022-47_sar-di.pdf

Suspicious Activity Reporting• When to file a SAR

– Criminal violations involving insider abuse in any amount

– Criminal violations aggregating $5,000 when suspect can be identified

– Criminal violations aggregating $25,000 or more regardless of a potential suspect

FFIEC BSA/AML Exam Manual page 60

Suspicious Activity Reporting• Timing of a SAR Filing

– 30 calendar days from the date of the initial detection of facts that may constitute a basis for filing a SAR

– 60 days if no suspect can be identified– Every 90 days for continued suspicious

activity

9. Monetary Instrument Log• Monetary instruments include:

– Bank checks or drafts• Foreign drafts

– Money orders– Cashier’s check – Traveler’s checks

• Purchased in exchange for currency

Monetary Instrument Log• Banks are required to verify the identity of

persons purchasing monetary instruments for current in amounts between $3,000 and $10,000, inclusive, and to maintain records of all such sales

• Does your bank permits sales to non-customers?

FFIEC BSA/AML Exam Manual page 95

10. Funds Transfers• Each bank involved in funds transfers

must collect and retain certain information for transfers of $3,000 or more.

• Requirement is commonly referred to as the “Travel Rule” (the information that must travel with the funds transfers)

• Specific information needed is found at FFIEC BSA/AML Exam Manual pages 100-103

Conclusion1. FinCEN2. FFIEC BSA/AML

Examination Manual3. Four Pillar of a

BSA/AML Compliance Program

4. Risk Ranking5. CIP vs. CDD and

EDD

6. Currency Transaction Reports

7. Structuring8. Suspicious Activity

Reports9. Monetary Instrument

Log10.Funds Transfers

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BSA Officer Must Know(Best Practices)

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