BSA Excellence: Officer Training

Transcription

1 Welcome to BSA Excellence: Officer Training 1 Compliance Outsourcing Partnership Solutions The Karen I. Martino Group COPS A Partner Only Firm Specializing in: BSA Independent Third Party Audits Compliance Audits Internal Audits Loan Review Co-Sourcing Services 2 1

2 About the partners Karen I. Martino is president of Karen I. Martino Group,. Prior to establishing C.O.P.S. in January 2005 Karen worked for 20 years at a regional community bank with over 2 billion is assets. There she was EVP-Director of Audit, Compliance & Security, reporting directly to the Audit Committee of the Board of Directors. She was a member of the Executive Management Team; participating in strategic planning and new product/services development. Karen is a Certified Internal Auditor and past President of the NY/NJ Chapter of the Financial Managers Society. Mary Marley is a partner in the Karen I. Martino Group,. Prior to establishing C.O.P.S. in January 2005 Mary worked for 18 years at a regional community bank with over 2 billion in assets. There she specialized in finance as Controller with her most recent 7 years spent as VP of Loan Servicing. Mary chaired the Mortgage Servicing Committee of the NJ League of Community Bankers from January 2002 through December Stephanie Szatkowski is a partner in the Karen I. Martino Group,. Prior to establishing C.O.P.S. in January 2005 Stephanie worked for 24 years at a regional community bank with over 2 billion in assets. Stephanie was a VP Retail Administration/Branch Operations/Sales. Her focus at the bank was on creating a branch structure to support a sales culture, development of a Customer Relationship Management Program (CRM), policy and procedure development to support internal controls and compliance. Stephanie is a former teacher for the Woodbridge Adult Education Night School. 3 Polling Question Have you had an Exam from your Regulator within the past 6 months? YES No 4 2

3 BSA Excellence: Officer Training A two session program- exploring the elements of an effective compliance program. Session One Elements of an Effective Compliance Program BSA/AML- - Risk Assessment Process Customer Identification Program (CIP) Risk Rating Factors High Risk Accounts Monitoring & Enhanced Due Diligence Anti-Money Laundering 5 BSA Excellence: Officer Training Session Two October 11, 2006 Currency Transactions Reporting Sales of Monetary Instruments Funds Transfers Information Sharing 314a & 314b OFAC Designated Exempt Persons Suspicious Activity Reporting Training Independent Testing Expanded Procedures Minimum Recommended Board Reporting Package Best Practices 6 3

4 Elements of an Effective Compliance Program 7 Written Board Approved Policy BSA Officer and Support Staff BSA/AML Risk Process Monitoring Independent Testing Board Reporting Training Board Policy Refer to Policy Elements link 8 4

5 BSA Officer and Support Staff The BSA Officer must have the authority and responsibility to administer an effective BSA/AML compliance program appropriate to the bank s risk profile Access to Board or Committee there of 9 The BSA Officer is Responsible for Managing the BSA/AML Compliance Program Coordinator of Monitoring, Documentation, and Reporting Knowledgeable of Regulations, Bank Operations and Core System or Additional Software 10 5

6 The Role of the BSA Officer and Staff 11 CTR monitoring, review and filing SAR investigations, review and filing Identification of High Risk activities, business, and countries Monitoring of High Risk Accounts Compliance with OFAC regulation Assure that BSA compliance is incorporated in all business units. BSA/AML Risk Assessment Process Know what risks and vulnerabilities your institution has Then design your risk process accordingly. 12 6

7 BSA/AML Risk Assessment Process Your process must consist of: Bank s BSA/AML Overall Risk Assessment Bank s OFAC Risk Assessment Bank s CIP (Customer Identification Program) Risk Assessment Customer s BSA/AML Risk Assessment 13 Sample - Overall BSA/AML Financial Institution Risk Assessment Refer to link 14 LOW MODERATE HIGH Geographic location: The bank/branch or service location is not located in a high-intensity drug trafficking area (HIDTA) or high intensity financial crime area (HIFCA); therefore, limited or no transactions with high-risk geographic locations. Products & Services: The Bank offers traditional products and services that pose little to no risk of money laundering or terrorist activity. Point of Entry for New Accounts: The Bank only opens accounts in person at a branch or service location. Customer Base: Stable known customer base. None or limited high risk customers or businesses. Internal Controls: Well established BSA policies, procedures and training program as well as monitoring and reporting systems. Low turnover of key employees. The bank has a combination of locations in and not in an HIDTA or an HIFCA; therefore, minimal transactions with high risk geographic locations. The Bank offers limited products and services that pose a higher degree of risk for money laundering. N/A Customer base increasing identified a moderate number of high risk customers and businesses. Adequate and sometimes informal BSA policies, procedures and training program. Monitoring and reporting systems fairly new and/or some level of manual monitoring required. Changes in key employees presenting moderate impact. The majority of the Bank s branch/service locations are located in an HIDTA and an HIFCA; therefore, significant volume of transactions with high-risk geographic locations. The Bank offers a significant number of products and services that pose a higher degree of risk for money laundering. The Bank allows accounts to be opened not in person, such as thru the Internet or mail. A large and growing customer base outside of trade area including a large number of high risk customers and businesses. Policies, procedures and/or training are non existent or at best informal. Completely new untested system and/or little to no monitoring capability. High turnover, especially in key personnel positions having a significant impact on operations. 7

8 BSA/AML Overall Risk Assessment Factors 15 Evaluation and Rating of Geographic location Products and Services Points of Entry for New Accounts Customer Base Internal Controls OFAC Risk Assessment Factors Evaluation & Rating of OFAC Customer Base Stability E-Banking Activity Automated OFAC Verification Software History of OFAC Actions 16 8

9 CIP Risk Assessment Factors (Customer Identification Program) Evaluation & Rating of CIP Product Type of Account Holder Method of Account Opening 17 Customer Risk Factors Relationship With Bank Type of Business or Occupation Customer s Business Activity Customer s Banking Activity 18 9

10 Customer Risk Factors Type of accountholder (or applicant) consumer or business Type of account product retail or lending and type of collateral Customer status new/existing Customer location local/out-of-state/foreign Method of account opening face-to-face /mail/internet/telephone Citizenship/Country of organization Type of business/transactions expected 19 Customer Identification Program (CIP) 20 Verifies the identity Maintains records Compares customer to lists of known or suspected terrorists or terrorist organizations Continues the delivery of quality customer service Therefore 10

11 Back to Basics CIP = Know Your Customer Build Customer Profile Build Business Profile Risk Rate 21 Building the Consumer/Business Profile Occupation/Nature of Business Type of Ownership Years Established Address/Principal Place of Business Customer Since/Customer Relationships 22 11

12 Additional Elements to Gather Anticipated Banking Activity Wire Activity - Domestic or Foreign Monetary Instruments Cash Deposits and Withdrawals Check/ACH Activity 23 Elements to Evaluate Customer / Business Do they fall into a High Risk Business? Do they offer NBFI services? Do you know their source of funds? 24 12

13 CIP leads to Customer Risk Ratings Refer to link Customer Based Risk Rating 25 Polling Question How many customer risk factors are you using? Did not develop Up to 5 5 or More 26 13

14 Q & A Break Select *1 now to ask a live question through the phone OR Type your question into the chat box in the lower left corner of the screen and click on the Send button located right below the box. 27 CIP and the BSA Officer s Role Monitor new accounts reports (Retail and Lending) Determine if staff is obtaining and documenting necessary information Determine if accounts are properly risk rated Source Documents Customer Profile System Reports OFAC Run ID Verification Results 28 14

15 High Risk Monitoring & Enhanced Due Diligence Scheduled Monitoring Based on Risk Rating High- monthly or quarterly Medium-quarterly or semi-annually Low- unusual or change in activity should be picked up during daily monitoring. 29 High Risk Monitoring & Enhanced Due Diligence Documented Analysis Standardized Review: What are you looking for: cash activity, check deposit copies, wire activity, ACH activity Summary of Activity: Is it consistent with the type of occupation or business, review like accounts together (i.e.) Jewelers, Gas Stations, Lawyers, etc. Draw a Conclusion: Is it normal and consistent with anticipated activity, is a SAR investigation warranted

16 Additional Monitoring for Anti-Money Laundering 31 Anti-Money Laundering Money laundering is the criminal practice of processing ill-gotten gains, or dirty" money, through a series of transactions; in this way the funds are cleaned so that they appear to be proceeds from legal activities. Money laundering generally does not involve currency at every stage of the laundering process. Although money laundering is a diverse and often complex process, it basically involves three independent steps that can occur simultaneously: 32 16

17 Anti-Money Laundering Placement: The first and most vulnerable stage of laundering money is placement. The goal is to introduce the unlawful proceeds into the financial system without attracting the attention of financial institutions or law enforcement. Placement techniques include structuring currency deposits in amounts to evade reporting requirements or commingling currency deposits of legal and illegal enterprises. An example may include: dividing large amounts of currency into less-conspicuous smaller sums that are deposited directly into a bank account, depositing a refund check from a canceled vacation package or insurance policy, or purchasing a series of monetary instruments (e.g., cashier s checks or money orders) that are then collected and deposited into accounts at another location or financial institution. 33 Anti-Money Laundering Integration: The ultimate goal of the money laundering process is integration. Once the funds are in the financial system and insulated through the layering stage, the integration stage is used to create the appearance of legality through additional transactions. These transactions further shield the criminal from a recorded connection to the funds by providing a plausible explanation for the source of the funds. Examples include the purchase and resale of real estate, investment securities, foreign trusts, or other assets

18 Anti-Money Laundering Structuring A person structures a transaction if that person, acting alone, or in conjunction with, or on behalf of, others persons, conducts or attempts to conduct one or more transactions in currency in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading the [Currency Transaction Report (CTR) filing requirements]. In any manner includes, but is not limited to, breaking down a single currency sum exceeding $10,000 into smaller amounts that may be conducted as a series of transactions at or less than $10,000. The transactions need not exceed the $10,000 CTR filing threshold at any one bank on any single day in order to constitute structuring. 35 Red Flags 36 18

19 Efforts to Avoid Reporting or Recordkeeping Requirement 37 A customer is reluctant to provide information needed to file a mandatory report, to have the report filed, or to proceed with a transaction after being informed that the report must be filed A customer is reluctant to furnish identification when purchasing negotiable instruments in recordable amounts A person customarily uses the automated teller machine to make several bank deposits below a specified threshold A customer accesses a safe deposit box after completing a transaction involving a large withdrawal of currency, or accesses a safe deposit box before making currency deposits structured at or just under $10,000, to evade Currency Transaction Report (CTR) filing requirements Funds Transfers Many funds transfers are sent in large, round dollar, hundred dollar, or thousand dollar amounts Funds transfer activity occurs to or from a financial secrecy haven, or to or from a high-risk geographic location without an apparent business reason or when the activity is inconsistent with the customer s business or history Many small, incoming transfers of funds are received, or deposits are made using checks and money orders. Almost immediately, all or most of the transfers or deposits are wired to another city or country in a manner inconsistent with the customer s business or history Funds transfers are sent or received from the same person to or from different accounts 38 19

20 Automated Clearing House Transactions Large-value, automated clearing house (ACH) transactions are frequently initiated through third-party service providers (TPSP) by originators that are not bank customers and for which the bank has no or insufficient due diligence 39 Activity Inconsistent with the Customer s Business The currency transaction patterns of a business show a sudden change inconsistent with normal activities A large volume of cashier s checks, money orders, or funds transfers is deposited into, or purchased through, an account when the nature of the accountholder s business would not appear to justify such activity 40 20

21 Other Customer Activity Suspicious A customer frequently exchanges small-dollar denominations for large-dollar denominations A customer frequently deposits currency wrapped in currency straps or currency wrapped in rubber bands that is disorganized and does not balance when counted A customer purchases a number of cashier s checks, money orders, or traveler s checks for large amounts under a specified threshold 41 Anti-Money Laundering BSA Officer Function Ensure AML compliance program matches the bank s risk profile Determine AML policy, procedures and programs cover all products and business units of the bank Identification of system capabilities and tools Ensure training is provided for money laundering Red Flags 42 21

22 System Identification & Monitoring Capabilities Regulatory Reporting (CTRs) System Capabilities- Report(s) that allows you to verify required CTRs including aggregating transactions by TIN 43 System Identification & Monitoring Capabilities Structuring / Money Laundering System Capabilities- Report(s) that allows you to review: Cash transactions of $4,500 or more Cash transaction for the month that aggregates to $12,000/$15,000 Cash Transactions for a rolling 3 month history for $30,000/$50,

23 System Identification & Monitoring Capabilities High Risk Activities Reports of Wire Transfer Activity Reports of ATM/Debit transactions in Foreign Countries Cash Tracking (monitors shipment activity) Reports 45 Monitoring Results No Action needed Customer Risk Rating Adjustments Suspicious Activity Investigations SAR Filing 46 23

24 Q & A Break Select *1 now to ask a live question through the phone OR Type your question into the chat box in the lower left corner of the screen and click on the Send button located right below the box. 47 Your feedback is important to us! Please complete the seminar survey. Simply click on the Seminar Survey in the LINKS area to the left of this slide. From the drop-down box at the top of the survey, choose the BSA Excellence series. Complete the survey and click on Submit to send us your responses This concludes part 1 of this program. Thank you for your participation

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