February 10, 2012
Michelle Hemerley
Director, Compliance Consulting
Introduction and Overview
• Introduction
• Board Reporting
– Best Practices Report Format
– Scorecard
• Board Training
– Various Methods of Training
– Topics to Include
• Recent FinCEN information
• The new Consumer Financial Protection Bureau
Board Reporting
• At least Annually
– Effectiveness of the BSA/AML Program
– Approve Policy and Risk Assessment
• Best Practices – At least Quarterly BSA Report
– Program, Policy, Risk Assessment update
– Examination and Audit update
– SAR Reporting
•Number and Dollar Amounts
•General Summary of Suspicious Activity
•Any issues with SAR Reporting
BSA/AML Board Report
• Scorecard Example
2012
Key BSA Items
SARs Filed
SARs NOT filed by
Management decision
CTRs Filed
CTR IRS Corrections
Outgoing Wire
Transfers
Incoming Wire
Transfers
Wire Transfers Greater
than $3,000
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
BSA/AML Report
• Additional Scorecard Items
– Monetary Instruments purchased with cash
greater than $3,000
– High-Risk customer numbers and percentages
– OFAC matches
– 314(a) matches
– Accounts opened / Loans Closed
Additional BSA/AML Report Items
• High-Risk Customer information
• Reviews and Monitoring information
• Visits to High-Risk Customers
• BSA/AML Training Conducted
Board Training
• Types of Training
– Computer Based
– In-Person
– Documentation
• Annual BSA/AML Training
– Initial
– Refresher/Risk Based/Recent Enforcement
Actions
Annual Board Training
• What is Money Laundering?
– Placement – Introduce unlawful proceeds into the
banking system without attracting attention
– Layering – Moving funds around to create confusion
and complicate the paper trail
– Integration – Ultimate goal to create the appearance of
legality
• Terrorist Financing
BSA/AML & OFAC Requirements
• Currency Transaction Report (CTR)
– Purpose is to create a “paper trail” for transactions (deposit,
withdrawal, etc.) conducted with cash
– Required to complete a CTR for all cash transactions over
$10,000
• Monetary Instrument Log
– Purpose is to create a “paper trail” for monetary instruments
(cashier’s checks, money orders, traveler’s checks, etc.)
purchased with cash
– Required to maintain a record of all monetary instruments
purchased with cash between $3,000 and $10,000
BSA/AML & OFAC Requirements
• Suspicious Activity Report (SAR)
– Purpose is to assist in combating terrorist financing,
money laundering, and other financial crimes.
– Required to identify, research and report suspicious
activity
• Office of Foreign Asset Control (OFAC)
– The office that administers and enforces economic and
trade sanctions against targeted foreign countries,
terrorists, international narcotics traffickers, and those
engaged in activities related to weapons of mass
destruction.
– Prohibited from opening an account or conducting a
transaction with anyone on the OFAC list.
Role of Board of Directors
• Establish culture of compliance - set the tone
• Approve BSA/AML Compliance Program and
appoint BSA/AML Officer
• Provide direction and support to management
• Discuss BSA/AML significant concerns
• Maintain knowledge of BSA/AML requirements
• Ensure necessary corrective action is taken
Role of Senior Management
• Manage the enterprise-wide BSA/AML program
• Report Quarterly to Board of Directors
• Establish a structure to identify, monitor and
manage BSA/AML risk for the Bank
• Clearly assign responsibility and accountability
• Provide appropriate resources
• Integrate BSA/AML compliance objectives into
management goals
Key Components of BSA/AML Program
• BSA/AML Compliance Program Requirements:
– Internal controls – policies, procedures, and processes
to control risks and achieve compliance
– Independent testing
– Designated BSA/AML personnel
– Training
– Board of Directors Oversight
• Customer Identification Program (CIP)
Key Components (Cont’d)
• Risk assessment
• Customer & Enhanced Eue diligence
• Suspicious activity detection, monitoring and
reporting
• OFAC
• USA PATRIOT Act - section 314 (a) and (b)
• Information and communication
BSA/AML Compliance Program
•BSA/AML Officer – Michelle Hemerley
•Assistant BSA Officers
•BSA/AML Department
•High Risk Account Specialist
•FinCEN 314 & OFAC Compliance Officer
•Independent Audit completed by X
Customer Identification Program
• Most Important Key – Know Your Customers
• Required to Verify the Customer’s Identity and
obtain required documentation (Name,
Address, DOB, SS#)
• Run against X list
Due Diligence
• Initial Customer Due Diligence
• Identification
• Proof of Business
• Anticipated Activity & Returns
• Google
• Enhanced Due Diligence
• Contact customer to discuss business
• Visits
• Monitoring
Money Laundering Red Flags
• Customers Who Provide Insufficient or
Suspicious Information
• Activity Inconsistent with the Customer’s
Business
• Other Suspicious Activity (I.e., wire transfers,
increase in activity or returns)
• Employee Activity
High-Risk Customers
• Cash Intensive Businesses
• International Businesses/PEPs
• Third Party Processors
• Outbound Telemarketing
• Debt Consolidation
• Privately Owned ATMs
High-Risk Customers
• Money Service Business
– A Business that conducts more than $1,000 in business
with one person in one or more transactions on the same
day in one or more of the following services:
•Money orders, Traveler’s checks and Stored Value /
Prepaid Access Cards
•Check cashing / Payday Lending
•Currency dealing and exchange OR
•Providing money transfer service IN ANY AMOUNT
Product Information
• Remote Deposit Capture (RDC)
– Scan checks and transmit images
• Remotely Created Checks (RCC)
– Check authorized by customer remotely via phone or
on-line without signature
• Automated Clearing House (ACH)
– Network for electronic alternative to paper checks –
governed by NACHA rules
• Third Party Payment Processor
– Provide payment processing to merchants and other
business entities
Identifying Suspicious Activity
• Risk analyzed at initial account opening
• Risk score based on:
– Type of business and volume of activity
– Geographic location
– Average Ticket
– Previous Returns
• Customers are monitored by the BSA/AML
Department accordingly
Identifying Suspicious Activity
• BSA/AML Department Monitoring
– MSB Monitoring – Structuring, commercial check
cashing, microstructuring as well as site visits and
annual reviews
– Cash Vault Monitoring – Monthly review of cash
withdrawal fluctuations
– Remote Deposit Capture Monitoring – Daily, monthly
and periodic reviews of variances, returns, and
unusual trends or activity
– ACH Monitoring - Monthly review of activity variances
and analysis of returns
Reporting Suspicious Activity
• If suspicious activity is
noted, complete Unusual
Activity Form and send to
BSA/AML Department
immediately
• Be sure to explain “Who”,
“What”, “When”, “Where”,
“How” and “Why” you are
suspicious
• Keep CONFIDENTIAL –
never discuss with anyone
Refresher/Risk Based Training
• Recommend still cover BSA/AML requirements
and Board responsibilities
• Bank’s specific BSA/AML Risks according to Risk
Assessment
• Recent Examination Findings and Enforcement
Actions
• Latest Money Laundering Schemes
– Check Fraud
– Mortgage & R/E Fraud
– Illegal Aliens
– Internet Gambling
– Human Trafficking
Recent FinCEN Information
• Sign up for FinCEN e-mails / AMLA membership
• Law Enforcement Case Examples
• FinCEN Requires AML Program and SAR Filing
for Non-Bank Mortgage Lenders and Originators
• FinCEN Extends Deadline for Adopting New CTR
and SAR
The New Consumer Financial
Protection Bureau (CFPB)
•CFPB Authority
– Bank’s over $10 Billion and Non-Bank Financial
Institutions
– Consumer Complaints
– Various Consumer Regulations – not BSA/AML
•New Examinations
– Product Life Cycle
– Consumer Perspective
– UDAAP and Fair Lending
Final BSA/AML
Comments &
Questions