Understanding the Bank Secrecy Act March 9, 2005 2:00 pm EST

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Understanding the Bank Secrecy ActMarch 9,
2005200 pm EST

• By Haydée R. Gilliam
• Office of Financial Regulation
• State of Florida

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Welcome to Todays Webinar

• Our Speakers
• Haydée Gilliam
• Brian Knight

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Objectives

• Discuss current BSA environment
• Provide framework for understanding the 4
  pillars of BSA compliance
• Identify common concerns noted in the examination
  process
• Discuss new challenges for credit unions

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Current BSA Environment
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Anti- Money Laundering Regulations

• USA PATRIOT Act
• Bank Secrecy Act
• Office of Foreign Assets Control Regulations

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USA PATRIOT Act

• Uniting and Strengthening America by Providing
  Appropriate Tools Required to Intercept and
• Obstruct Terrorism
• Signed October 24,2001
• Expanded the applicability of the Bank Secrecy
  Act to several new businesses and added new
  requirements

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Bank Secrecy Act (BSA)

• Past focus
• Currency Transaction Reports
• Information related to monetary instruments
• New focus
• BSA program 4 pillars
• Customer identification program
• Suspicious Activity Reporting

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BSA compliance after the USA PATRIOT Act

• Requirements to understand, assess and monitor
  customer base
• Increased role of financial institutions in
  reporting suspicious activities

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Office of Foreign Asset Control (OFAC) Regulations

• Financial institution must identify and freeze
  the assets of targeted countries, terrorists,
  drug cartels and other specially designated
  persons
• Periodically issued as Specially Designated
  Nationals and Blocked Entities List (SDN List)

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What are the 4 Pillars?
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BSA Program 4 Pillars

• Development of Internal Policies, Procedures, and
  Controls
• Risk focused policies
• Procedures for each area or function

Part 748 .2(b) and (c)
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BSA Program 4 Pillars (Continued)

• Controls to ensure compliance
• Monitoring system
• Manual
• Automated
• Reporting
• Exceptions
• Timeliness

Part 748 .2(b) and (c)
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BSA Program 4 Pillars (Continued)

• Designation of Compliance Officer
• Qualifications and experience
• Sufficient time
• Sufficient authority

Part 748 .2(b) and (c)
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BSA Program 4 Pillars (Continued)

• Training program
• Content
• Based on current procedures and system
• Relevant to audience position and duties
• Frequency
• Minimum Annually
• As needed based on changes or weaknesses
  identified
• Documentation

Part 748 .2(b) and (c)
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BSA Program 4 Pillars (Continued)

• Independent testing
• Scope
• Level of transaction testing
• Written assessment
• Actions to address results

Part 748 .2(b) and (c)
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Examination Concerns
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Customer Identification Program (CIP)

• INDIVIDUALS
• True Name
• Date of Birth
• Residential or Business Address,
• Identification Number
• BUSINESSES
• Legal Name
• Address of Principal Place of Business, Local
  Office or Other Physical Location
• Identification Number

Part 748.2 (b) and 31 CFR 103.21
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What do examiners look for?

• Compliance with the 4 Pillars
• Comparison of written policies to practice
• Testing the monitoring system transactions
  versus risk assigned
• Talking with the staff to evaluate effectiveness
  of training

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Suspicious Activity Reporting

• Timeliness
• Documentation
• For SAR filed
• When not filing a SAR

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New Challenges for Credit Unions
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Business Accounts

• Understanding business activity and expected
  volumes
• Documentation
• Level of Monitoring

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Wire Transfer

• Usage
• Businesses
• Others
• Documentation
• For initiator
• Logs
• Level of Monitoring

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Money Service Business

• Definition
• Federal statutes
• State statutes
• Why considered high risk
• Volume of activity
• Perceived ability to reduce scrutiny of
  transaction

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Private Banking Clients

• Definition
• Account with 1 million or more for non-US person
• Enhanced due diligence
• No final rule issued
• Interagency guidance to date
• Perceived ability to reduce scrutiny of
  transaction

USA PATRIOT Act Section 312
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Private Banking Clients (Continued)

• Interagency guidance
• Ascertain the identity of all nominal and
  beneficial holders of any beneficial ownership
  interest in the account
• Ascertain the source of wealth deposited into the
  account
• Ascertain the whether the holder may be a senior
  political official figure

USA PATRIOT Act Section 312
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Senior Political Figure or Politically Exposed
Persons (PEPs)

• Senior Political Figure is Broadly Defined to
  Include
• A current or former senior official of foreign
  government, political party or foreign
  government-owned enterprises
• A Corporation or other Entity Formed by or for
  the Benefit of any Such Persons
• An Immediate Family Member of such person
• A person who is Widely and Publicly Known (or
  actually known to the FI) to Maintain Close
  Personal or Professional Relationship with any
  such person.

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Summary

• BSA environment requires closer scrutiny by all
  parties
• A strong 4 pillars foundation is essential
• Examiners will look at your documentation to
  support your BSA compliance assessment
• New clients mean new opportunities but also may
  add new risks

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Questions?
Haydée R. Gilliam Tel [phone] Haydee.Gilliam
_at_FLDFS.com Brian Knight Tel [phone] Brian_at_na
scus.org