Transcript Fort Worth Community Credit Union

Leaders Credit Union
Board Presentation
Bank Secrecy Act
April 2007
BANK SECRECY ACT
Passed by Congress in 1970
Requires financial institutions to report information
and keep records of certain monetary transactions
Referred to as an “Anti-Money Laundering” law
Designed to identify the source, volume, and
movement of currency and other monetary
instruments into or out of the U.S. or deposited into
financial institutions
The BSA was put into place to safeguard the U.S.
financial system from the abuses of financial crimes,
including money laundering, terrorist financing,
and other illicit financial transactions
BANK SECRECY ACT
Money Laundering Control Act of 1986
Anti-Drug Abuse Act of 1986
Currency and Foreign Transactions
Reporting Act
Financial Recordkeeping and the
Department of Treasury’s Reporting of
Currency and Foreign Transactions rules
USA Patriot Act, 2001
Source: Financial Crimes
Enforcement Network (FinCEN)
BANK SECRECY ACT
12 USC 1818(s)(2) requires that the NCUA include a
review of the BSA compliance program at each examination
of a credit union. The NCUA may use their authority to
enforce compliance with the BSA.
Regulatory agencies may take a range of actions in the event
of a BSA violation
Criticism in examination report
Memorandum of Understanding
Cease and Desist order
Civil money penalties
Referral to Treasury
BANK SECRECY ACT
Civil Penalties for Violations
Federal banking agencies and FinCEN,
respectively, can bring civil money penalty
actions for violations of the BSA. In addition,
to criminal and civil money penalty actions
taken against them, individuals may be
removed pursuant to 12 USC 1818(e)(2) for a
violation of the AML laws under Title 31 of the
U.S. Code.
Significant Enforcement Actions
FinCEN issued two large civil money penalties in
December 2006; Beach Bank in Miami, Florida for
$800,000.00 and Foster Bank in Chicago, Illinois for
$2,000,000.00. Violations included inadequate AML
program, inadequate internal controls, failure to report
suspicious activity, lack of independent testing, etc.
NCUA issued a “Cease and Desist Order” against the
Dover N.J. Spanish American Federal Credit Union in
February 2007 for substantial BSA compliance
problems. ($15,000,000.00 with 4,000 members)
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Money Laundering – filtering money from
illegal activities through the financial
system to conceal illegal sources of income
Laundered money may be deposited or
withdrawn in a series of transactions to hide
the illegal activity
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Terrorist Financing
Intended to intimidate through the threat of
violence
Goal – to compel a government or organization
to do something, or refrain from doing
something that will result in furthering the
terrorist’s agenda
Ideological motivation
Legitimate, as well as unlawful, sources
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Terrorist illegal activities include:
Extortion
Kidnapping
Narcotics trafficking
Smuggling
Fraud schemes, such as identity theft
BANK SECRECY ACT
Money Laundering Control Act of 1986:
Imposes criminal liability on a person or
institution that knowingly assists in money
laundering or who structures transactions to
avoid reporting it
Financial Institutions must establish and
maintain procedures designed to meet
compliance guidelines according to BSA
requirements
BANK SECRECY ACT
Money Laundering Methods:
Currency smuggling
Structured deposits or withdrawals from
accounts
Purchases of various types of monetary
instruments
Credit, debit or stored value cards
Funds transfers
BANK SECRECY ACT
BSA reportable transactions include:
Deposits or withdrawals of more than $10,000
in cash in a day
Purchase of monetary instruments (money
orders, cashiers checks, travelers cheques) with
more than $3,000 in cash
If member inquires about how to do the
transaction without being reported, LCU must
file a “Suspicious Activity Report”
BANK SECRECY ACT
LCU complies with BSA as outlined in
Board policy
Cash transactions exceeding $10,000 will
be reported on a Currency Transaction
Report form FinCEN104
Suspicious Activity Reports are filed as
required
BANK SECRECY ACT
SUSPICIOUS ACTIVITY REPORTS
NCUA established thresholds for credit
unions:
No threshold – If credit union is certain that an
insider is connected with the known or
suspected crime, reporting is required,
regardless of the amount involved
BANK SECRECY ACT
$5,000 threshold – Credit union will report crimes
of $5,000 or more if it knows the identity of the
suspect or suspects the following:
Transaction involves money laundering
Transaction is designed to specifically evade the BSA
Transaction has no apparent lawful purpose or is not
the sort of transaction in which the account holder
usually engages, and the credit union can determine no
reasonable explanation for the transaction
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$25,000 threshold – The credit union must report all
known or suspected crimes of $25,000 or more even if it
does not know the identity of the suspect.
SAR reports are confidential. The member can NOT be
told that a report has been filed.
Employees who are subpoenaed or requested to disclose a
SAR must decline unless it is by FinCEN, an appropriate
law enforcement agency, or supervisory agency
Disclosure of a SAR is a FELONY and could land the
discloser in jail.
BANK SECRECY ACT
LCU does not sell monetary instruments to non-members
LCU reviews a report daily, which tracks all transactions
that require a Currency Transaction Report be filed when a
member makes single or multiple deposits on the same
business day equaling $10,000.01 or more.
The report also tracks transactions between $3,000 and
$10,000 for tracking purposes of monetary instruments
Records are retained for all originated Wire Transfers
All records are retained for the required 5 year period
BANK SECRECY ACT
USA Patriot Act-Customer Identification
Program (Board policy 10/1/2003)
Verify identity of any person seeking to
open an account
Maintain records of documents used
Check for OFAC listing and SDN listing
ID Flag Verification through PAC
BANK SECRECY ACT
Compliance Programs and Procedures
Internal controls, policies and procedures to
assure ongoing compliance
Independent Audit
Designate a BSA Compliance Officer
Ongoing training for Staff and Board
Bank Secrecy Act
Leaders Credit Union
Board Presentation
Facilitated by
Rita McCaslin, EVP