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Changes to the BSA/AML Examination Manual David A. Reed, Partner, - PowerPoint PPT Presentation

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Risks & Revisions: The Changes to the BSA/AML Examination Manual David A. Reed, Partner, Reed & Jolly, PLLC March 18, 2015 Reed & Jolly, PLLC The FFIEC BSA/AML Manual is the only resource I need for research and analysis. a.

  1. Risks & Revisions: The Changes to the BSA/AML Examination Manual David A. Reed, Partner, Reed & Jolly, PLLC March 18, 2015 Reed & Jolly, PLLC

  2. The FFIEC BSA/AML Manual is the only resource I need for research and analysis. a. True b. False Reed & Jolly, PLLC

  3. Take a Deep Breath • The Manual was last revised in 2010 and there have been many changes since that time. – Everything is now in 31 CFR Chapter X • Keep up with BSA through the usual channels and you’ll stay up to date. – Think e-Filing • This area of compliance has many entry points for information and guidance. Reed & Jolly, PLLC

  4. The New Phone Book Is Out! Reed & Jolly, PLLC

  5. Table of Contents Reed & Jolly, PLLC

  6. But We Get It from Here Reed & Jolly, PLLC

  7. How This Works • Federal Financial Institutions Examination Council (FFIEC) issued the new manual • The Board of Governors of the Federal Reserve System, FDIC, NCUA, OCC, and State Liaison Committee revised the manual in collaboration with the Financial Crimes Enforcement Network (FinCEN), the administrator of the BSA, and the Office of Foreign Assets Control (OFAC) Reed & Jolly, PLLC

  8. I’ve Always Wondered…. • The FFIEC is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions and to make recommendations to promote uniformity in the supervision of financial institutions. Reed & Jolly, PLLC

  9. A Bit More • The State Liaison Committee includes representatives from the Conference of State Bank Supervisors, the American Council of State Savings Supervisors, and the National Association of State Credit Union Supervisors. Reed & Jolly, PLLC

  10. How Does FinCEN Communicate? • BSA/AML Manual – http://www.ffiec.gov/%5C/bsa_aml_infobase/default.htm • Guidance – http://www.fincen.gov/statutes_regs/guidance/di.html • Advisories/Bulletins/Fact Sheets – http://www.fincen.gov/news_room/advisory/ • Administrative Rulings – http://www.fincen.gov/statutes_regs/rulings/di.html • SAR Activity Review – http://www.fincen.gov/news_room/rp/sar_tti.html Reed & Jolly, PLLC

  11. Drink from the Source! Reed & Jolly, PLLC

  12. Stay Off this List Reed & Jolly, PLLC

  13. NCUA AIRES Questionnaire Reed & Jolly, PLLC

  14. NAFCU Resources • BSA Blast • Compliance eNewsletter • Compliance Blog • GPS Manual • Compliance School and Seminar • Webinars Reed & Jolly, PLLC

  15. Suspicious Activity Report • Incorporated new SAR E-Filing requirements; guidance on the extension of SAR filing for continuing activity; clarification of prohibitions on disclosing a SAR; and guidance on sharing SARs with affiliates. Reed & Jolly, PLLC

  16. Let’s See How this Works • Final confidentiality rule issued in 12/10 and FinCEN issued Advisory FIN-2012-A002 in 3/12 • The rule clarifies the confidentiality requirement and the advisory focuses on the need to maintain SAR confidentiality, even in litigation • The latest version of the manual incorporated these details and developments (p73) Reed & Jolly, PLLC

  17. Affiliate Sharing • An institution that has filed a SAR may share the SAR, or any information that would reveal the existence of the SAR, with US affiliates (p 74). – Specific definition for affiliate • Incorporates Guidance FIN-2010-G006 Reed & Jolly, PLLC

  18. Operational Issues • We have been online since 2013, but issues remain. – Who is your back up? • Confidentiality is a BIG deal! – Even the existence of the SAR must be kept confidential. – What would you do in the face of a subpoena? Reed & Jolly, PLLC

  19. Currency Transaction Reports • Revised to incorporate new CTR E-Filing requirements and new guidance issued by FinCEN since 2010 related to currency transaction aggregation for businesses and exemptions. • Businesses with a common owner are presumed to be independent persons (p81). Reed & Jolly, PLLC

  20. Exemptions • Certain businesses ineligible for exemption as non-listed business • Refers to FinCEN Guidance FIN-2012- G005 • Letter provides an administrative ruling defining motor vehicles, vessels, aircraft, and farm equipment as it relates to exempting the cash transactions of a member from the requirement to file a CTR Reed & Jolly, PLLC

  21. Which are the best sources for keeping up to date on BSA/AML laws, rules, regulations and best practices? a. The Manual b. FinCEN and NAFCU c. NCUA d. I’m already there, why bother? e. None of the above Reed & Jolly, PLLC

  22. Foreign Correspondent Account Recordkeeping • Included regulations relating to the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) • Imposes strict reporting requirements for accounts linked to Iranian financial institutions. (p112) • Model certification form – http://www.fincen.gov/statutes_regs/frn/pdf/CISADA_Certification.pdf Reed & Jolly, PLLC

  23. Foreign Bank and Financial Accounts • Do not confuse with FUBAR! • Incorporated new FBAR filing requirements (p 137) • Incorporated changes to electronic filing of FinCEN Form 114 – http://www.fincen.gov/forms/files/FBAR%20Li ne%20Item%20Filing%20Instructions.pdf Reed & Jolly, PLLC

  24. International Transportation of Currency or Monetary Instruments Reporting (CMIR) • Clarified monitoring and reporting obligations under the BSA for international transportation of currency or monetary instruments (p 139) • Focuses on FinCEN Form 105 • Incorporated FinCEN Guidance FIN-2014- G002 Reed & Jolly, PLLC

  25. Bulk Shipments of Currency • Revised to incorporate FinCEN’s CMIR guidance for common carriers of currency, including armored car services (p 183). • Clarifies monitoring and reporting obligations • Incorporated FinCEN Guidance FIN-2014- G002 Reed & Jolly, PLLC

  26. Foreign Correspondent Accounts • Included additional guidance in the section on risk mitigation (p 178). • References the Wolfsberg Anti-Money Laundering Principles for Correspondent Banking – http://www.wolfsberg- principles.com/pdf/standards/Wolfsberg- Correspondent-Banking-Principles-2014.pdf Reed & Jolly, PLLC

  27. ACH Transactions • Incorporated National Automated Clearing House Association (NACHA)- The Electronic Payment Association modifications related to international ACH transactions (IAT) (p 218). • Further defined third-party service providers (p 220). • Incorporated FinCEN Guidance FIN-2012- A010 Reed & Jolly, PLLC

  28. Operational Issues • Institutions without a sound BSA/AML monitoring system may be exposed to additional risks, especially when accounts are opened over the Internet. • Processors are typically not subject to BSA requirements. Reed & Jolly, PLLC

  29. Prepaid Access • New section (p 227) • Replaced Electronic Cash section and included an expanded discussion of risk factors and risk mitigation related to prepaid access. • Huge growth in pre paid and payroll cards • Changes related to MSBs as well Reed & Jolly, PLLC

  30. Third-Party Payment Processors • Updated to reflect interagency guidance issued since 2010 (p 235). • FinCEN Guidance FinCEN Advisory FIN- 2012-A010 Reed & Jolly, PLLC

  31. Operational Issues • Increased money laundering activity through 3 rd party payment processors • Need for continuing due diligence • SAR possibilities if payment processor conducted illegal transactions • Include “Payment Processor” in SAR Narrative Reed & Jolly, PLLC

  32. Embassy, Foreign Consulate, and Foreign Mission Accounts • Updated to incorporate the interagency guidance on accepting accounts from foreign embassies, consulates, and missions (p 296). • Guidance issued 3/24/11 – http://www.fincen.gov/statutes_regs/guidance/pdf/FFIEC_FinCEN _24_march.pdf Reed & Jolly, PLLC

  33. Operational Issues • Think Riggs Bank – You must understand and mitigate the risks • System does not want these entities to go “unbanked” • New Guidance makes clear that not all such accounts are high risk Reed & Jolly, PLLC

  34. Nonbank Financial Institutions • Incorporated new FinCEN regulations for Money Services Businesses (MSBs) related to certain foreign-located persons engaging in MSB activities; new regulations related to prepaid access programs; and guidance regarding virtual currency administrators and exchangers. Reed & Jolly, PLLC

  35. We Know MSB’s • MSBs include 5 distinct types of financial services providers and the U.S. Postal Service: (1) dealers in foreign exchange ; (2) check cashers; (3) issuers or sellers of traveler’s checks or money orders, ; (4) providers or sellers of prepaid access; and (5) money transmitters. • Administrative Letter Rulings regularly answer questions on specific MSB activities. Reed & Jolly, PLLC

  36. Pre Paid Access Cards • 2011 Rule designates providers and sellers of prepaid access as MSBs (p 302). – Certain exclusions • References FAQ on Pre Paid Card Final Rule – http://www.fincen.gov/news_room/nr/html/201 11102.html Reed & Jolly, PLLC

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