BSA/AML/OFAC Update Presented By: Daniel J. Mahalak
Daniel J. Mahalak Dan is the President of Mahalak Consulting Co. He spent most of his career at Cindrich, Mahalak & Co., a CPA firm that specialized in working with credit unions and their subsidiaries. He joined that firm in 1980 upon graduating from Eastern Michigan University and became a partner in 1988. Mahalak Consulting Co. provides professional services in the following areas: • • • Strategic Planning Net Worth Restoration Plans Fraud/Embezzlement Investigations • • • Regulatory Matters Accounting Assistance/Advice CUSO Development/Consulting • • • Mergers Policy/Procedure Development Education & Training • • • Budgets/Financial Plans Executive Search/Human Resources Speaking Engagements Throughout his career, Dan worked in all phases of the CPA practice. He has been involved in all audit activities, staff training and development, and a wide range of consulting projects. His extensive experience allows him to provide clients with unique insights into any problems, issues, or challenges they are facing. Throughout his tenure, Dan has been responsible for hundreds of credit union audits. He continues to work with credit unions in strategic planning, budgeting and forecasting, asset‐liability management consulting, mergers and acquisitions, regulatory consulting, human resources consulting, and a variety of other consulting projects. He has worked in fraud/embezzlement investigations, including filing bond claims, working with authorities, and testifying in criminal proceedings. He is a frequent speaker on topics related to the credit union industry on both a local and national level, and has written articles for several credit union publications. Dan is also an independent consultant representing Doeren Mayhew in providing services to credit unions. As one of the nation’s largest CPA and Advisory firms with a highly specialized, focused financial institutions group, DM has a strong local and national reputation based on technical expertise, industry knowledge, along with exceptional service to credit unions. 2 SEPTEMBER 2019
Agenda • What is BSA • BSA Compliance • BSA/AML Topics • OFAC • Penalties & Fines • Questions 3 SEPTEMBER 2019
What is BSA • In 1970, Congress passed the Currency and Foreign Transactions Reporting Act (Bank Secrecy Act) • Other statutes that require financial institutions yo obtain and retain certain records, as well as report certain transaction to the federal government. • These include: • Money Laundering Control Act • Anti‐Drug Abuse Act • USA PATRIOT Act, Title III 4 SEPTEMBER 2019
Goals of BSA • The purpose is to help identify the source, volume, and movement of currency and other monetary instruments transported or transmitted into or out of the U.S. or deposited into financial institutions • Safeguard the financial industry from threats of money laundering and illicit finance • Ensure a recordkeeping and reporting system to prevent, deter, investigate and prosecute financial crime • Aid in the investigation of money laundering, tax evasion, international terrorism, or other illegal activity 5 SEPTEMBER 2019
BSA Compliance Program • Establish and maintain a BSA compliance program • BSA Compliance Officer • Internal Controls • Education and Training • Independent Testing 6 SEPTEMBER 2019
BSA Compliance Officer • Responsible for BSA compliance on a day‐to‐day basis • Must be approved by board of directors • Reports to board • Must be provided adequate authority to do his/her job 7 SEPTEMBER 2019
Internal Controls • Required by the BSA • Consists of policies, procedures, and processes to ensure systematic compliance with BSA 8 SEPTEMBER 2019
Independent Testing • Required by the BSA • Should be completed every 12 to 18 months 9 SEPTEMBER 2019
Training • Regular ongoing training is required • All staff whose duties require knowledge of the BSA • Board of Directors and other volunteers • BSA compliance officer 10 SEPTEMBER 2019
Risk Assessments • Assessing the CU’s risk profile is required to implement adequate risk management processes • Review risk categories (products, services, members, entities, geography, transactions, etc.) • Detail and update this analysis of risk for each category on an ongoing process • Should be reported to and approved by board 11 SEPTEMBER 2019
Member Identification Program • Must be included in written BSA Compliance Program • Enable CU to form reasonable belief that it knows true identity of member • Must include account procedures that specify the identifying information obtained • Include reasonable and practical risk‐based procedures for verifying identity of member • Compare identity to government lists 12 SEPTEMBER 2019
Member Identification Program • Information required • Name • Address • Date of Birth • Identification number • Verification of identity • Who must provide this information • Record retention – 5 years 13 SEPTEMBER 2019
Member Due Diligence • The cornerstone of a strong BSA/AML compliance program is comprehensive CDD policies, procedures, and processes for all members, particularly those that present a higher risk for money laundering and terrorist financing • The objective is to predict with relative certainty the types of transactions a member is likely to engage in • Helps evaluate the BSA risk of individual members 14 SEPTEMBER 2019
Member Due Diligence • Policies, procedures, and processes can aid in • Detecting and reporting unusual or suspicious transactions • Avoid criminal exposure from persons who use or attempt to use CU products and services for elicit purposes • Adhering to safe and sound practices • This is an ongoing process from account opening throughout relationship 15 SEPTEMBER 2019
Enhanced Due Diligence • If credit union determines that a member is higher risk, it requires closer monitoring and may require additional due diligence information to be collected, both at account opening and throughout the relationship 16 SEPTEMBER 2019
Money Services Businesses • CU should determine if it has accounts with any MSBs • Dealer in foreign exchange • Check casher • Issuer or seller of traveler’s checks or money orders • Money transmitter • Provider of prepaid access • Seller of prepaid access • U.S. Postal Service • Must assess risk in these cases, and take appropriate steps to mitigate this risk • Due diligence expetations 17 SEPTEMBER 2019
Beneficial Ownership • Procedures must be designed to identify and verify beneficial owners of legal entities account holders • Legal entities are corporations, limited liability companies, or other legal entities created by filing public documents with Secretary of State • Beneficial owners • Control prong – single individual with significant responsibility to control, manage, or direct a legal entity. One must be identified. • Ownership prong – individual who owns 25% or more or equity interest in a legal entity. Up to 4 could be identified. 18 SEPTEMBER 2019
Beneficial Ownership • CU must have written procedures detailing identifying information to be obtained for each beneficial owner. • Name • Date of birth • Address • Identification number • These policies should also address: • Circumstances when the CU should not open an account • The terms under which an account may be used while CU attempts to verify identity of beneficial owner(s) • When an account should be closed after verification attempts have failed • When a SAR should be filed 19 SEPTEMBER 2019
Currency Transaction Reporting • Whenever a non‐exempt member deposits or withdraws currency in excess of $10,000 the credit union will submit a CTR, FinCEN Form 104, electronically by the 15 th day following the date of the transaction • Multiple currency transactions totaling more than $10,000 are treated as one (aggregated) • CUs should obtain acceptable form of identification from person conducting transaction • Copies must be retained for 5 years after filing 20 SEPTEMBER 2019
CTR Exemptions • The CU may exempt a member from CTR reporting if certain criteria are met. No CTR will be filed for a transaction involving an exempt person acting within the scope of his/her/its exemption. The CU must exercise due diligence in ascertaining whether any member that requests an exemption is eligible. • The CU may elect not to grant CTREs. If so, the BSA/AML Policy should so state. 21 SEPTEMBER 2019
CTR Exemptions • Must file Designation of Exempt Person (DOEP) one time within 30 days of first exempted transaction • BSA Compliance Officer should review and approve • Should also be reviewed at least once per year and documented 22 SEPTEMBER 2019
CTR Exemptions • Phase I CTR exemptions • Financial institution (domestic operations) • Federal, state, or local government agency or department • Any entity exercising governmental authority within the US • Any entity whose common stock are listed on NYSE, ASE, or NASDAQ • Any subsidiary of any “listed entity” at least 51% owned by listed entity 23 SEPTEMBER 2019
Recommend
More recommend
