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Decoding the Bank Secrecy Act & AML Manual
On June 21, 2021, members of the FFIEC released several updated sections and related examination procedures to the Bank Secrecy Act/Anti-Money Laundering Examination Manual that provide instructions to examiners when assessing the adequacy of a bank’s BSA/AML compliance program.
The June updates to the Bank Secrecy Act/Anti-Money Laundering Examination Manual, released by the FFIEC, did not establish new requirements. However, the updates offered a more transparent breakdown of, and guidance for, the examination process. Below are the highlights from the release.
International Transportation of Currency or Monetary Instruments Reporting (“CMIR”)
The Manual reaffirmed that any person who receives or physically transports, mails, or ships – or attempts to do so – currency or other monetary instruments that is cumulatively valued at over USD 10,000, is required to file a Report of International Transportation of Currency or Monetary Instruments.
Importantly, the Manual added a subsection titled “Examiner Assessment of Compliance with CMIR Requirements” that noted that the role of examiners is to determine if banks are situated to mitigate and manage money laundering (“ML”), terrorist financing (“TF”), and other financial misconduct. To do so, the subsection advised examiners to consider general internal controls concepts such as dual controls, segregation of duties, and management approval for certain actions. The subsection also urged examiners to consider that banks may have isolated instances of regulatory violations which do not necessarily point to a total failure of internal controls.[1]
[1]https://www.ffiec.gov/press/PDF/Intl_Transportation_of_Currency_or_Mone…
Purchase and Sale of Monetary Instruments Recordkeeping
The Manual reasserted that banks are required to keep records related to the purchase and sale of certain monetary instruments, namely those valued at USD 3,000 or more.
The Manual added a subsection titled “Examiner Assessment of Compliance with Purchase and Sale of Certain Monetary Instruments Recordkeeping Requirements” which informed examiners that they can review certain information such as independent testing or audit reports to determine the adequacy of banks’ recordkeeping.[2]
[2]https://www.ffiec.gov/press/PDF/Purchase_and_Sale_of_Monetary_Instrumen…
Clarifying the Special Measures and a New Sub-section
The Manual included details concerning the form and duration of the five special measures listed in Section 311 of the USA Patriot Act: (1) recordkeeping and reporting of certain financial transactions; (2) obtaining information relating to beneficial ownership; (3) obtaining identifying information relating to customers using payable through accounts (PTAs); (4) obtaining identifying information relating to customers using correspondent accounts; and (5) imposing conditions on opening or maintaining correspondent or PTAs. The first four measures may be imposed without prior public notice but are required to have a limited duration and must be issued alongside a Notice of Proposed Rulemaking (NPRM), while the fifth measure can only be implemented by regulation. Moreover, the new version explained that Section 311 establishes procedures for selecting the specific special measures to be imposed against a jurisdiction, financial institution, class of transactions, or type of account that is of primary ML concern.
The Manual also added a subsection titled “Examiner Assessment of Compliance with Special Measures” which called for examiners to ascertain if banks are able to combat ML, TF, and other illicit financial activity and directs examiners to consider general internal control concepts. The subsection reminded examiners that specific special measures orders from Section 311 can be issued or rescinded based on judgement from the Treasury Secretary. Furthermore, the subsection pointed out that examiners are only responsible for looking into special measures that were finalized during previously agreed upon examination periods.[3]
[3] https://www.ffiec.gov/press/PDF/Special_Measures_Narrative_and_Exam_Pro…
Reports of Foreign Financial Accounts (“FBAR”)
The Manual reaffirmed that any US-based person is required to file a Report of Foreign Bank and Financial Accounts if that person has a financial interest in a bank, securities, or any other financial account that is valued at over USD 10,000. The Manual pointed out that FBAR filing is a crucial component of preventing the circumventing of US laws.
In the subsection titled “Reports of Foreign Financial Accounts Examination and Testing Procedures,” the Manual included a specific step for examiners to take when testing banks, which involves determining whether the banks’ internal controls are designed to assure ongoing compliance with FBAR filing requirements and are commensurate with the banks’ risk profile.[4]
[4] https://www.ffiec.gov/press/PDF/Reports_of_Foreign_Accounts_Narrative_a…
Implications for Financial Institutions
These updates should be leveraged by Financial Institutions to further recognize the importance of the examination process for assessing a bank’s BSA/AML Compliance Program. Financial Institutions should look to incorporate the changes into their policies and frameworks to enhance their BSA/AML compliance programs, so they can recognize bad actors and take the appropriate action, when necessary.
If you would like to learn more about these updates, please reach out using the contact form below. Our staff’s industry knowledge and experience in compliance enables us to assist our clients in managing compliance-related matters. Sia Partners Consultants can offer guidance and expertise in reviewing your BSA/AML compliance program(s) to ensure compliance with the new amendments.
