Bank Secrecy Act Anti-Money Laundering

Anti-Money Laundering/Bank Secrecy Act
Examination Guidelines Released

By William Campbell Ries, Esq.

"The OCC brought enforcement actions against banks for failing to maintain adequate BSA/AML compliance programs and ordered those banks to provide for internal controls, auditing, and employee training, and to designate a BSA compliance officer," according to the OCC March 2005 Quarterly Journal on Special Supervision and Enforcement Activities.

On July 5, 2005, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Association, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision joined with Financial Crimes Enforcement Network of the Department of the Treasury ("FinCen") to issue an Examination Manual on Bank Secrecy and Anti-Money Laundering (the "Examination Manual"). The Examination Manual combines regulatory guidelines on what financial institutions need to know to operate and maintain an effective anti-money laundering program. The Examination Manual will be utilized by bank examiners to conduct examinations of financial institutions on compliance with bank secrecy and anti-money laundering programs.

The Examination Manual provides comprehensive guidance to financial institutions on the requirements of an anti-money laundering compliance program. It attempts to combine the guidance previously issued by agencies in separate releases and is intended to provide a single reference source. The Examination Manual addresses some of the issues which have arisen with respect to Suspicious Activity Reports ("SARs"). Many banks have filed defensive SARs for fear that they may be criticized for failing to file under questionable circumstances. The Examination Manual provides additional guidance concerning when SARs must be filed.

The Bank Secrecy Act and the U.S.A. Patriot Act require financial institutions to establish and maintain comprehensive

compliance programs governing bank secrecy and anti-money laundering. These programs must be approved by the board of directors and are subject to its oversight. Examiners are required to conduct examinations of bank compliance programs and must issue sanctions if it is determined that the bank has failed to establish or maintain effective anti-money laundering procedures. Sanctions are mandatory and violations can lead to civil and criminal enforcement actions.

As previously stated by examiners, compliance is based upon a risk-based approach which may be applied differently at each financial institution based upon the products and services offered. Each financial institution must conduct a risk assessment, develop policies and procedures, train employees, appoint a compliance officer, and have the compliance program tested by independent third parties.

We recommend each financial institution review their entire program based upon the information contained in the Examination Manual to ensure compliance with regulatory guidelines. An effective program will avoid embarrassment arising from regulatory sanctions as well as reputation risks resulting from violations identified by your examiners. In addition to the release of the Examination Manual, the regulators are planning a series of two-hour conference calls scheduled for August 2, 3 and 4 at 1:00 p.m. Eastern Daylight Time to provide further information.

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