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Bank Secrecy Act Policy

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Title: Bank Secrecy Act Policy


1
Bank Secrecy Act Policy
Internal Revenue Service
2
IRS BSA Jurisdiction
  • FinCEN delegated BSA examination authority to IRS
    for
  • Financial institutions not under supervisory
    authority of a federal regulator or
    self-regulatory organization
  • Non-Bank Financial Institutions (NBFIs)

3
IRS BSA Jurisdiction
  • NBFIs include
  • Money Services Businesses (MSBs)
  • Casinos Tribal and Non-Tribal
  • Some Credit Unions
  • Entities subject to Section 352 of USA PATRIOT
    Act
  • Insurance companies
  • Dealers in precious metals, gems, jewels

4
SB/SE Compliance BSA Structure
  • 385 BSA examiners devote 100 of exam time to BSA
    cases
  • Hiring 50 more BSA examiners in FY 2008

5
Selection Process
  • Leads from
  • Use published services
  • Internet research
  • Analysis of Currency and Banking Retrieval System
    (CBRS) information
  • Reliance on information received during exams
    competitor lists
  • Information from FinCEN/IRS Criminal
    Investigation/TEGE/States

6
Selection Process
  • Methods to select BSA cases for examination
    changing
  • Moving to more top-down approaches such as
  • Examine MSB principals
  • Examine principal agents

7
Selection Process
  • Testing a selection process that uses
    statistically valid risk factors
  • Working with FinCEN and States to efficiently use
    exchanged MSB examination information

8
BSA Examination Approach
  • Risk analysis in a particular institution
  • Risk of money laundering
  • Risk of non-compliance
  • Identify potential "High Risk" areas

9
BSA Examination Procedure
  • Identify the entitys AML risks and develop the
    examination scope and plan
  • Assess effectiveness of the Anti-Money Laundering
    (AML) program
  • Determine whether the AML program elements have
    been effectively implemented
  • Assess whether breakdowns in the AML program
    place the institution at risk

10
IRS BSA EXAM PROCEDURES
  • Determine if compliance program is consistent
    with regulatory requirements
  • Determine if compliance program is effective
  • Assess effectiveness of AML policies and
    procedures
  • Review internal controls
  • Review independent review results

11
IRS SB/SE BSA EXAM STEPS
  • Preplan
  • Initial Contact / Appointment
  • Set Scope and Depth - Risk Analysis
  • Evaluate Program, Policies, Procedures, and
    Internal Control
  • Interview
  • Determine Effectiveness of AML Program
  • Limited Transactional Testing
  • Closing the Examination

12
DETERMINE IMPLEMENTATION
  • In-depth interviews of personnel responsible for
    compliance with the BSA are key to confirming
    that the AML program has been effectively
    implemented.

13
BSA TRANSACTIONAL TESTING
  • Initially include the most current 3 month period
  • Test the effectiveness of the AML program and
    determine if there are any weaknesses that impact
    compliance through transactional testing
  • Transactional testing is on a sample basis

14
Examination Outcomes
No Violations Letter 4029
(No Issue Letter) Technical, minor,
infrequent, Letter 1112 isolated, or
non-substantive (Violation letter) violations S
ignificant BSA Refer to FinCEN
for violation or deficiency penalty
/warning consideration Willful criminal
violation Refer to IRS Criminal
Investigation
15
BSA Examinations
Through July 2007
16
Contact Information
  • Charlotte McGuffin
  • BSA Technical Advisor
  • 904-665-1264

17
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