If you run a business that facilitates or conducts money transactions, or transactions in other liquid commodities, you are no doubt aware of FinCEN. Rest assured that FinCEN is aware of you, too. And we predict it’s only a short matter of time before their foreshadowing of AML enforcement actions against the cash servicing and transport industry becomes a harsh reality.
The Financial Crimes Enforcement Network (FinCEN) is the arm of the U.S. Treasury charged with investigation and enforcement of Bank Secrecy Act provisions intended to block the financial sources of illegal and terrorist organizations. Traditionally, the BSA applied to common financial institutions like banks and credit unions. But as banks began to offload services to third party vendors and the number of money-related businesses like check cashers and wire transfers proliferated, the BSA has been applied to an ever-wider array of businesses.
Most of these newer businesses are collectively known as Money Service Businesses (MSB). Businesses that transmit money, issue money orders, cash checks, deal in foreign currencies, or a number of other types of transactions, are required to register with FinCEN and maintain an effective Anti-Money Laundering (AML) program. … Continue reading
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.
“The fight against money laundering and terrorist financing is a pillar of U.S. national security and a strong financial system.” – Adam J. Suzbin, Department of the Treasury
Money launderers will go to great lengths to use the normal activities of legitimate banks, credit unions, and money service businesses to help them “clean” ill-gotten gains. The Bank Secrecy Act (BSA) sets forth AML rules, to help financial institutions identify and report potential money laundering and terrorist financing activities.
Our latest infographic highlights the typical 3-step money laundering cycle and outlines key components of an effective anti-money laundering program. Use this infographic as a quick reference to educate your employees and stakeholders on the importance of finely-tuned AML controls. … Continue reading
One of the hottest—and hardest—topics in BSA/AML compliance is managing the risks due to third parties. Regulatory agencies including FinCEN, OFAC, and others have expanded the definition of “third party” to include any business relationship between a financial entity and another party, except a customer. This includes the subcontractors of your contractors or vendors.
At the same time, changes in the financial system have greatly expanded the kinds and frequencies of third party relationships. Financial institutions may now outsource or contract for entire departments or key banking functions that used to be entirely in-house. Globalization increases the number of these relationships that are international, with related parties in two or more countries, and may trigger the scrutiny of the (OFAC) in addition to the other regulatory agencies operating within the U.S. … Continue reading
Like every other important function in a financial entity, a BSA/AML compliance program cannot be expected to operate on autopilot. Managers and employees have to be aware of their responsibilities in the compliance program, and contribute actively as needed. Appropriate training is necessary to transform a compliance program design into an effective on-going operation.
The content and depth of training protocols will vary depending on the size, type, complexity, and risk profile of the organization. However, the Bank Secrecy Act and related laws require that covered organizations have the ability to implement business-specific anti-money laundering programs to help enforce the laws. Broadly speaking, the training program that will enable the organization to do this has five elements.
1. The Board of Directors and Senior Management have to maintain oversight.
As part of a “culture of compliance,” top managers have to be fully informed about the policy issues involved in BSA regulations and authorize the resources needed to comply. They should periodically monitor and evaluate the compliance program based on a risk adjusted evaluation (audit) as well as reports on internal controls. Ultimately, the organizational risk due to money laundering needs to be fully understood at this level, both with respect to the consequences of the crime as well as of non-compliance. … Continue reading