As 2015 comes to a close, we are pleased to share our most popular articles from the Risk Management Blog in 2015.
1. 4 Red Flags of Money Laundering or Terrorist Financing
One of the most important aspects of BSA/AML compliance is the responsibility it places on regulated financial entities to report suspicious transactions. This responsibility requires an organization to be able to monitor and identify transactions, evaluate them in real time, and flag the ones that are suspicious. In many cases, a Suspicious Activity Report (SAR) should be filed with the Financial Crimes Enforcement Network (FinCEN).
2. 5 Key Components of a BSA/AML Compliance Program
You are most likely familiar with the Financial Crimes Enforcement Network (FinCEN) which is a bureau of the Treasury Department. FinCEN’s mission is “to safeguard the financial system from illicit use and combat money laundering and promote national security” through the use of financial services information.
3. The Important Role of Internal Controls for AML Compliance
It is well understood that money launderers use deceit or theft to capture the processes of financial entities for illicit purposes. As a result, your AML compliance program must implement internal control designs that increase the chances of preventing or detecting such activities.
“Use of third parties reduces management’s direct control of activities and may introduce new or increase existing risks, specifically operational, compliance, reputation, strategic, and credit risks as well as the interrelationship of these risks. Increased risk most often arises from greater complexity, ineffective risk management by the bank, and inferior performance by the third party.” – Office of the Comptroller of the Currency, October 30, 2013 Bulletin
It’s well established that banks are increasingly turning to third parties to handle a wide range of activities and processes, from cash transport and ATM replenishment to IT and other services. However, when you examine the latest standards and scrutiny placed on financial institutions by the FDIC, CFPB, FFIEC, OCC, FinCEN, and others, it is clear that whether the activities are being performed by the bank itself or a third-party vendor, it’s the bank that carries the bulk of the risk. … Continue reading
Last month we had the pleasure of sponsoring and attending the third annual Secure Cash and Transport Association (SCTA) conference in Chicago. One of the sessions at the conference was presented by Alan Cox, of the Financial Crimes Enforcement Network (FinCEN). He is the Acting Associate Director of the Liaison Division for FinCEN. In this role, he oversees major activities at FinCEN to combat money laundering, terrorist financing, and other forms of illicit activity.
FinCEN is a bureau of the treasury that writes anti-money laundering rules, anti-terrorist financing rules, and collects data through those rules, analyzes and reports data to law enforcement. The data it collects is some of the most important data law enforcement has in combatting illicit money flows.
FinCEN has been pushing new requirements and enforcement actions for those deemed to be money transmitters. This has had implications for the CIT industry as well as the banking and ATM industry. … Continue reading
Firms must comply with the Bank Secrecy Act and its implementing regulations (“AML rules”). – Financial Industry Regulatory Authority
The Bank Secrecy Act (BSA) and all the related laws that have been passed since the BSA began in 1970, aim to harden targets within the financial system against money laundering schemes. AML rules accomplish this by requiring covered institutions to implement an Anti-Money Laundering Plan (AMLP)—essentially putting surveillance into the hands of the financial institutions in the fight against money laundering.
Your AMLP must comply with the guidelines in the rules, providing authority and controls, generating a set of mandatory reports, exercising customer due diligence, and maintaining an information trail. Even though each financial institution is permitted to develop the plan consistent with its own risk-adjusted profile, The AMLP is a serious undertaking.
Our Infographic on Anti-Money Laundering provides a checklist of the background and components of an AMLP. Although the final plan will be greatly more detailed, the infographic organizes what has to be done in context so why it has to be done is easily understood.
Both the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) mandate that covered financial entities—and this includes all banking institutions, virtually all money service businesses, and many cash-intensive non-bank businesses—establish an Anti Money Laundering (AML) compliance program.
Compliance is not an optional choice, and that imposes costs. The good news is that the costs of compliance can be managed relative to each business’ risk profile with respect to money laundering. In other words, a smaller business with limited risk can establish an effective compliance program that will stand up to scrutiny at a lower cost than a big bank with lots of foreign transactions. FinCEN and OFAC promote risk-based compliance programs in recognition of this reality.
However, every business that is covered by BSA/AML requirements should be looking at similar factors in building a risk profile, the first step toward a compliance program. The risk factors common to all financial businesses include business lines (type of business function), customers (meaning any person or entity that can engage in financial transactions), products and services, and location. … Continue reading