| “Bank Secrecy Act Compliance Management – The Basics” First of all and let’s get this out of the way first: the Bank Secrecy Act isn’t going away. Sorry to have to be the one who tells you this. Personally, I think the Bank Secrecy Act requirements will increase in scope and intensity. So, now that this is out of the way, let’s see how we manage this increasing regulatory burden effectively and realistically. FinCEN or the Financial Crimes Enforcement Network is in charge of administering and enforcing the Bank Secrecy Act. Through the NCUA and the state regulatory agencies, the Bank Secrecy Act is enforced by FinCEN. The NCUA and state regulatory agencies have signed agreements with FinCEN to examine for Bank Secrecy Act compliance at the credit unions. So I urge you to visit the FinCEN website to keep up with what’s going on. The website address is www.FinCEN.gov. Because FinCEN, the NCUA, and state regulatory agencies have signed these agreements, that is why your regulatory examiner is asking you all of these questions about the Bank Secrecy Act. The NCUA has issued several Letters to Credit Unions far regarding the Bank Secrecy Act. I urge you to read these Letters for more information on what is required of your credit union. Visit the NCUA website at www.NCUA.gov and the Letters to Credit Unions link is on the left side of the web page. The most recent and pertinent Letters to Credit Unions are discussed below. These Letters are what your regulatory examiner is reading, so you should read them also! As you well know, with compliance comes policy and procedures. I often joke with my clients that “In the beginning was the Policy Manual.” You are required to have a Bank Secrecy Act Policy and provide for a Bank Secrecy Act Compliance Officer. To implement your Bank Secrecy Act Policy, written procedures are necessary. The Board of Directors should approve the Policy and also designate, by name, the BSA Compliance Officer in their Board minutes. I also recommend the Board approve the Bank Secrecy Act Policy on an annual basis. Be proactive, don't avoid the Bank Secrecy Act! I will discuss more about the Bank Secrecy Act Policy below. After the Bank Secrecy Act Policy is developed and approved by the Board of Directors, you will need documented, written procedures to implement the Policy. I strongly recommend you keep your Policy and procedures separate for two reasons: 1. The compliance requirements are continually changing. It is easier to update procedures than Policy. Policy changes require action by the Board of Directors while procedures can be changed without Board action. 2. As your operations change your procedures will change. Again, it is easier to change procedures than Policy. As you add new products, locations, staff, and operating procedures you can change just the Bank Secrecy Act procedures and not the Policy. In developing your Bank Secrecy Act Policy, NCUA Letter to Credit Unions 03-CU-16 issued in October 2003, which is titled “Bank Secrecy Act Compliance”, is your guiding document. To summarize this NCUA Letter and what is required: “Credit unions must establish and maintain a written compliance program for fulfilling the requirements of the Bank Secrecy Act that includes at least:
Failure to comply with the requirements of Bank Secrecy Act and its implementing regulations can result in both civil and criminal penalties.” This is where you start with your credit unions’ compliance with the Bank Secrecy Act. Your Bank Secrecy Act Policy must include the first four (4) requirements and components. Part 748 of the NCUA Rules & Regulations briefly addresses the Bank Secrecy Act. Basically Part 748 states that the credit union should “establish and maintain procedures reasonably designed to assure and monitor compliance” with the Bank Secrecy Act. Part 748 also lists the four components of a Bank Secrecy Act Compliance Program, previously noted above in NCUA Letter to Credit Unions 03-CU-16. The fifth requirement regarding anti money laundering, or AML, is a subject in itself. The NCUA has issued Letter to Credit Unions 05- CU-09 in June 2005, titled “Bank Secrecy Act Compliance – Frequently Asked Questions and Answers”, which deals specifically with detection and prevention of money laundering and terrorist financing. An anti money laundering (AML) program will be addressed separately on this website. I should also mention that on June 30, 2005 the FFIEC, and in particular the NCUA, issued a Bank Secrecy Act / Anti Money Laundering Examination Manual. This is a large document (300+ pages!) which is also a subject in itself. I will address this examination manual in a separate writing. Visit the FFIEC website to download this document: www.FFIEC.gov. In October, 2005 the NCUA issued Letter to Credit Unions 05-CU-16, "Bank Secrecy Act Compliance". This Letter included commentary and one enclosure:
The written procedures to implement your Bank Secrecy Act Policy are also a subject in itself. Volumes of commentary have been written about the specific procedures necessary, depending on the size and complexity of the credit union operations. In addition to written procedures a risk assessment should be performed by the credit union. There are several risk assessment forms available, your regulatory examiner may be able to provide one for you to utilize. My clients received a risk assessment form from me as part of my value-added service. I hope this brief outline on Bank Secrecy Act helps you get an idea of what is required to get started. The complexity of your requirements to comply with the Bank Secrecy Act is not going to get easier. Please feel free to contact me if you have any questions and/or would like to receive a risk assessment worksheet. Below is a list of Bank Secrecy Act regulatory guidance and pronouncements for further research and your reference. |
| Bank Secrecy Act Regulatory Guidance & Pronouncements Financial Crimes Enforcement Network www.FinCEN.gov FinCEN administers the Bank Secrecy Act (including USA Patriot Act) on behalf of the Department of the Treasury The SAR Activity Review: Trends, Tips, & Issues Other FinCEN rulings & guidance is on their website Federal Financial Institutions Examination Council www.FFIEC.gov Bank Secrecy Act / Anti-Money Laundering Examination Manual June 2005 National Credit Union Administration www.NCUA.gov NCUA Regulation 748.2 "Bank Secrecy Act compliance programs and procedures" Letter to Credit Unions 05-CU-16 October 2005 "Bank Secrecy Act Compliance" Reiterates FFIEC Bank Secrecy Act / Anti-Money Laundering Examination Manual ARIES Bank Secrecy Act Questionnaire (supersedes Letter 03-CU-16 Questionnaire) Letter to Credit Unions 05-CU-09 June 2005 "Bank Secrecy Act Compliance" Frequently Asked Questions and Answers Anti-Money Laundering Compliance Regulatory Alert 05-RA-06 September 2005 "The Bank Secrecy Act and Hurricane Katrina Victims" Frequently Asked Questions and Answers" Regulatory Alert 05-RA-05 May 2005 "USA Patriot Act Section 326: FAQs for Customer Identification Program (CIP)" Final CIP Rule Letter to Credit Unions 04-CU-03 March 2004 "Suspicious Activity Reports" Suspicious Activity Report Form and Instructions Regulatory Alert 04-RA-04 February 2004 "USA Patriot Act Section 326: FAQs for Customer Identification Program (CIP) Final CIP Rule Letter to Credit Unions 03-CU-16 October 2003 "Bank Secrecy Act Compliance" Compliance Self-Assessment Guide, includes: BSA Review Considerations BSA Checklist BSA Definitions BSA Questionnaire (superseded by Letter 05-CU-16) Regulatory Alert 03-RA-07 May 2003 "Final Patriot Act Regulations on Customer (Member) Identification" FinCEN 314(a) Requests Letter to Credit Unions 02-CU-14 September 2002 "Financial Action Task Force on Money Laundering" Guidance for Financial Institutions in Detecting Terrorist Financing Regulatory Alert 02-RA-04 June 2002 "Anti-Money Laundering Programs Interim Final Rule Published by FinCEN" Financial Action Task Force FATF An inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. |
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