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. True b. False Reed & Jolly, PLLC
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
The New Phone Book Is Out! Reed & Jolly, PLLC
Table of Contents Reed & Jolly, PLLC
But We Get It from Here Reed & Jolly, PLLC
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
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
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
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
Drink from the Source! Reed & Jolly, PLLC
Stay Off this List Reed & Jolly, PLLC
NCUA AIRES Questionnaire Reed & Jolly, PLLC
NAFCU Resources • BSA Blast • Compliance eNewsletter • Compliance Blog • GPS Manual • Compliance School and Seminar • Webinars Reed & Jolly, PLLC
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Third-Party Payment Processors • Updated to reflect interagency guidance issued since 2010 (p 235). • FinCEN Guidance FinCEN Advisory FIN- 2012-A010 Reed & Jolly, PLLC
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
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
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
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
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
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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