Risks & Revisions: The

Changes to the BSA/AML

Examination Manual

David A. Reed,

Partner, Reed & Jolly, PLLC

March 18, 2015

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The FFIEC BSA/AML Manual is the only

resource I need for research and analysis.

a. True

b. False

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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.

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The New Phone Book Is Out!

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Table of Contents

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But We Get It from Here

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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.

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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.

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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

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Drink from the Source!

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Stay Off this List

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NCUA AIRES Questionnaire

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NAFCU Resources

• BSA Blast

• Compliance eNewsletter

• Compliance Blog

• GPS Manual

• Compliance School and Seminar

• Webinars

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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.

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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)

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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

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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?

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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).

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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

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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

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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

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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

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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

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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

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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

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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

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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.

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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

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Third-Party Payment Processors

• Updated to reflect interagency guidance

issued since 2010 (p 235).

• FinCEN Guidance FinCEN Advisory FIN-

2012-A010

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Operational Issues

• Increased money laundering activity

through 3rd party payment processors

• Need for continuing due diligence

• SAR possibilities if payment processor

conducted illegal transactions

• Include “Payment Processor” in SAR

Narrative

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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

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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

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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.

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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.

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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

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The BSA’s key objectives are to identify

people conducting illegal transactions and:

a. To create and maintain a paper trail

b. To prevent identity theft

c. To stop international transactions

d. To allow financial institutions to learn more

about customer’s businesses

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Virtual Currency

• Where to begin ……

• Virtual currency is not “money”, but an

administrator or exchanger of virtual

currency is an MSB.

• FinCEN Guidance FIN-2013-G001

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BSA E-Filing System

• Appendix T: Created to provide examiners

with information on the FinCEN BSA e-

Filing System.

• Based on FinCEN’s BSA E-Filing System

Supervisory User Manual (Version 2.8,

June 2014)

• Always keep updated on the technical side

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http://www.ffiec.gov/bsa_aml_infobase/documents/BSA_AML_Man_2014.pdf

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QUESTIONS?

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