bank secrecy act for board members
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Bank Secrecy Act for Board Members. Agenda. Background and Purpose Money Laundering and Terrorist Financing BSA Program Requirements Risk Based Program Management Suspicious Activity Reports Board of Directors’ Responsibilities Penalties for Non-Compliance. Background and Purpose. - PowerPoint PPT PresentationTRANSCRIPT
Agenda Background and Purpose
Money Laundering and Terrorist Financing
BSA Program Requirements
Risk Based Program Management
Suspicious Activity Reports
Board of Directors’ Responsibilities
Penalties for Non-Compliance
Background and Purpose
Enacted in 1970 to help law enforcement officials track and prevent the laundering of money obtained through illegal activities
Amended many times over the years
Significant changes occurred with the passage of the USA PATRIOT Act in 2001.
Money Laundering“Money laundering is the process by which one conceals the existence, illegal source, or illegal application of income, and then disguises that income to make it appear legitimate.”
The Three Stages of Money Laundering:
Placement
Layering
Integration
PlacementMoney is physically moved away from the scene of the crime and is first introduced into the banking system.
Cash deposits
Cash purchase of monetary instruments
Cash loan payments
Currency exchange
LayeringMoney is transferred from account to account, institution to institution and country to country in an attempt to stymie investigators with a complex paper trail that loops through different legal jurisdictions.
Wire Transfers
Electronic Payments
IntegrationIntegration happens when washed cash becomes part of the legal economy and is effectively untraceable.
Purchase and sale of real estate or other assets
Obtaining business or personal loans
Legitimate or illegitimate business operations
Legitimate or illegitimate charitable operations
Terrorist FinancingTerrorist financing is often described as reverse money laundering in that it takes money that comes from “clean” sources and channels it to the “dirty” purposes of terrorism.
Sources of funds can include:
Wealthy Sympathizers
Fundraising at places of worship or cultural centers
Drug Trafficking
Official State Sponsorship (Sudan,Syria,Iran, Iraq)
Money Laundering is often a critical component of terrorist financing.
Four Main Program Requirements
Independent testing of BSA compliance.
A specifically designated person or persons responsible for managing BSA compliance (BSA compliance officer).
Training for appropriate personnel.
A system of internal controls to ensure ongoing compliance
Independent Testing Qualified
Independent
Transaction Testing
Comprehensive work papers
BSA Officer Authority
Adequate Staffing
Other Resources
Training
Training New employees upon hire
All employees periodically (annually)
Tailored to specific business lines
Employee accountability for compliance
Maintenance of training records and materials
Coverage of credit union policies, procedures, processes, and new rules and regulations.
Coverage of different forms of money laundering and terrorist financing
Penalties for noncompliance with internal policies and regulatory requirements.
Internal ControlsMinimum Requirements:
Customer/Member Identification Program
Customer/Member Due Diligence
Suspicious Activity Reporting
Currency Transaction Reporting
CTR Exemptions
Information Sharing under the USA Patriot Act
Monetary Instrument Recordkeeping
Funds Transfer Recordkeeping
Office of Foreign Assets Control (Can be a separate policy)
Internal ControlsBasic products and services offered:
Electronic Banking
Funds Transfers
ACH Transactions
Lending
Sale of Monetary Instruments
Internal ControlsExpanded products and services offered:
Third Party Payment Processing
Foreign accounts/branches/services
Correspondent Accounts
Brokered Deposits
Non-Deposit Investment Products
Insurance
Private Banking
Internal ControlsAccounts offered to certain individuals and organizations:
Nonresident Aliens and Foreign Individuals
Non-Bank Financial Institutions (MSBs)
Professional Service Providers (Doctors, Attorneys, Accountants, Real Estate Brokers)
Non-Governmental Organizations and Charities
Business Entities (Domestic and Foreign)
Cash-Intensive Businesses
Risk Assessment Considerations
Risk assessment not required
Examiners will complete one if the credit union does not
Tell your own story
BSA program should be based on the risk assessment
Risk Assessment Components
Assess the following areas: Products and Services Members Geographic Locations
Change as new products and services are introduced, strategic plans change, or field of membership changes.
Periodic updating
Address risks factors outlined in the FFIEC Exam Manual appendix J
Risk Assessment Considerations
The risk assessment should answer the following questions:
What types of products and services does the credit union offer?
Who is using them?
Where is the potential exposure to money laundering?
What steps have been taken to mitigate risk?
Suspicious Activity Reports
Credit unions are required to file a SAR if the institution knows or suspects that a transaction:
Involves illegal activity
Is designed to evade BSA regulations
Has no business or apparent lawful purpose
Reporting Limits
Insider abuse in any amount
Aggregate transactions of $5,000 or more when a suspect can be identified
Aggregate transactions of $25,000 or more regardless of a potential suspect
SAR Examples Insufficient or suspicious member information
Activity inconsistent with the member’s business
Unusual cash transactions
Unexpected or frequent funds transfers
Avoiding reporting or record keeping requirements (structuring)
Board of Directors’ Responsibilities
Approve the BSA Program annually
Appoint a BSA Officer
Review the BSA Risk Assessment as applicable
Review periodic BSA program updates
Ensure BSA officer has adequate staffing and resources
Review reports of filed Suspicious Activity Reports
Champion policy and procedure
For the Credit UnionCivil Money Penalties:
Failure to file CTRs - $25,000 to $100,000 per violation
Failure to file SARs - $25,000 to $100,000 per violation
Compliance Program violations - $25,000 per day
Record-keeping violations - $1,000 per violation
Pattern of Negligence - $50,000
Negligence - $500 per violation
Structuring – Dollar amount involved in transactions
For the Credit UnionRegulator Citations and Restrictions:
Cease & Desist orders
Delay or rejection of new applications
Revocation of federal deposit insurance coverage
For Individuals Generally: $250,000
and/or five years in prison for willful violations
If conducted to facilitate other criminal acts: $500,000 or ten years in prison
Heather LineCompliance SpecialistUtah Credit Union [email protected]