Transcript Managing BSA/AML Duties in the Midst of Chaos

Managing BSA/AML Duties in
the Midst of Chaos
Presented by
Mary Meile, President
The Anti-Money Laundering Association
February 16, 2011
The Financial Woes
• 2010, 157 banks failed, up from 140 in 2009.
• As of 2/14/2011 18 Failures
The Blaming Game
• The Financial Crisis Inquiry Report: Final
Report Of The National Commission On
The Causes Of The Financial And
Economic Crisis In The United StatesJanuary 2011
• Government Blames Both Regulators and
Financial Institutions for Economic
Collapse
The Blaming Game
• Their Answer: Transparency, More
Regulation and Oversight
The Businessman
• A man in a business suit is standing on a
wooden bridge. He walks out on the bridge
and the bridge breaks in half and he starts
to sink in the water. He is up to his neck in
water, a hand is extended to help pull him
out; but he chooses to drown! He has lost
HOPE.
• Don’t be that person………..
Strength and Unity
• The American flag
represents strength and
unity. The flag colors are
symbolic: Red symbolizes
Hardiness and Valor,
White symbolizes Purity
and Innocence and Blue
represents Vigilance,
Perseverance and
Justice.
• He loves his country best
who strives to make it
best. ~Robert G.
Ingersoll
Characteristics
• Hardiness: the capacity for enduring or
sustaining hardship; capability of
surviving under unfavorable conditions.
• Valor: boldness or determination in facing
great danger, especially in battle; heroic
courage; bravery. You all deserve a medal
for valor.
Characteristics
• Purity: the condition or quality of being
pure; freedom from anything that
debases, contaminates, pollutes.
• Innocence: the quality or state of being
innocent; freedom from sin or moral
wrong.
• Justice: the quality of being just;
righteousness, equitableness, or moral
rightness: to uphold the justice of a
cause.
Characteristics
• Vigilance: state or quality of being
vigilant; watchfulness.
• Perseverance: steady persistence in
a course of action, a purpose, a
state, etc., especially in spite of
difficulties, obstacles, or
discouragement.
The Compliance Professional
• Do you SEE the similarities in your role?
• Every compliance professional strives to
maintain and uphold the laws and
regulations within their organization.
• You survive under unfavorable conditions,
endure, are not thin skinned or timid,
must walk in boldness, hardiness and
valor daily.
The Compliance Professional
• Be set apart, pure, higher standard, not
corrupt.
• Be vigilant and watchful. You are the
gatekeeper, monitor.
• Press in, steady persistence, especially in
spite of difficulties, obstacles, or
discouragement.
• Seek justice and moral righteousness,
help the laws be fulfilled.
Strength and Unity
• There is much strength when we walk as
a team in unity. Don’t try to be a lone
ranger and get the job done. You can not
do it all.
• Talk to other peers, share, ask how they
are handling their set of challenges.
• Stop banging your head up against the
wall and accepting the chaos. Remember
WHO you are.
A Nation of Laws
•
•
•
•
BSA/AML and related laws provide us with
standards, guidance, and benchmarks.
Take seriously the obligation to comply with
federal laws and regulations.
Honor and respect the laws and lawmakers.
Obey those that enforce. They are just like
us-trying to get things done, accomplish their
duties to deter crime and see justice served
against law breakers.
A Nation of Laws
• Look for the good that comes from
implementing laws and regulations and
focus on that aspect.
• Change mindset from over regulated and
burdensome to add value!
• Cleans up our communities and society.
• Protects our freedom’s and rights.
You Make a Difference
• Your role is vital and important for our
nation’s security.
• Your work ethics and diligence are needed
and admirable.
• Others depend on your work results:
board, law enforcement and regulators.
• Your position will not be eliminated!
You Make a Difference
• When you stay current on emerging issues and
teach others you are enabling them to help and
make a difference.
• Every effort that you make to improve on your
existing program, to educate others from the
Board to Senior Management makes an impact.
• It is not enough to just obtain the knowledge,
you must share with those that have a need to
know.
You Make a Difference
• FACT: The more knowledgeable and
confident you are in what you are
doing the better performance, less
frustration, LESS CHAOS and no
Confusion.
Why Are You In This Role?
• The more passionate about a cause, the
more apt we are to give it our very best
effort and time.
• Patriotic and Love of Country
• National Security
• You want to be a soldier in the war
against crime, injustices, expose the
criminals, clean up our communities,
states, and Nation.
Why Are You In This Role?
• FLIP SIDE: Because my boss assigned it to
me. I hate compliance, I hate my job, our
nation is messed up and the leaders are
dragging us all down.
• Where does that lead to? DEAD END.
• If that is you, change your mindset OR
consider other job options.
• You are leading a cause of chaos and
confusion. Down the wrong path.
Managing the Task
• Organization: manageable when you take
appropriate steps to organize daily work load.
• Preparation: Procrastination has no place in the
duties of a BSA or AML Compliance Officer or
assistant.
• Leads to the 1,000 cuts by death-little at a
time, cut by cut. You get farther behind until
you are drowning and want to give up. Don’t be
like the businessman…..
Strategies That Do Work
• If you are underwater then start 2011
with the attitude and determination to
change the old way of doing things.
• Tap into some wisdom: Be smart and work
smart!
• Create work strategies that allow you and
your team to work at a comfortable paceno last minute fire drills.
Strategies That Do Work
• Review current processes and operating
procedures. How can you make them better?
Are they burdensome and causing more work or
as efficient as they can be?
• Consider your third party auditor to do the
transaction testing that you are not able to get
to.
• Ask other department managers for helpers! If
you can not afford additional help pull from
another area that have free time.
Strategies That Do Work
• Decide to do the overtime yourself knowing
that you will reap a reward and benefit.
• Pass on authority: Assign and delegate some of
your duties to others. A good manager will
delegate and promote. There are always those
that are willing to do more.
• Use a BSA/AML Committee to help maintain
your program momentum and help you get
those resources that you need.
Strategies That Do Work
• When you are training others, look for those
that ask questions and show a desire to learn
more.
• Develop a MUST Have List for your BSA program
and resources. Make this part of your risk
assessment and include when you report to the
Board.
• If you do not have adequate resources to do the
job then you are already opening the door for
regulatory criticism.
• Be persistent and respectful.
Work Strategies
• The board of directors is responsible for
ensuring that the BSA compliance officer
has sufficient authority and resources
(monetary, physical, and personnel) to
administer an effective BSA/AML
compliance program based on the bank’s
risk profile. Page 36 FFIEC BSA/AML Examination
Manual
Strategies That Do Work
• Plan to work off-site at least once a week to
get caught up with no distractions or shut door.
• Do your homework before you ask for resource.
Be prepared and ready to show the why and
how it will benefit the company overall.
• Approach with all facts (what the regulation
states, costs, solution, etc) and include a
statement of concern for the organization.
• If you don’t get it now, keep it on your risk
assessment for resources needed.
Strategies That Do Work
• You need FAVOR!! How do you receive
favor?
• Establish unity and willingness to give and
take. When you approach with a solution
already in hand you have a listening
audience!
• A humble and sincere heart along with
respect for those in authority over you
accomplishes more than demanding,
screaming and kicking.
Look for the Changes
• A city was not built overnight.
• Little changes in your program and
processes will start to surface. You will
notice better attitudes, people wanting
to help, an easy flow of things.
• Changes in procedures, attitude,
management style, and how you see and
handle others make a BIG difference.
Focus
• With the current economy day to day
operations are probably not focused on
BSA/AML Compliance.
• Senior Management focus is staying in
business and maintaining adequate
capital levels.
• You understand that BSA Compliance
MUST GO ON. Pick up the slack and stay
focused. Here is another reason why.
Zion’s First National Bank Fined $8
Million
• Federal agencies said the penalty should be a
warning to other banks to maintain effective
anti-money-laundering programs.
• "With these actions, we are sending another
strong message that banks need to be vigilant
and ensure that they have effective AML
programs in place," said John Walsh, acting
comptroller of the currency.
Zion’s First National Bank
• Bank failed to adequately monitor
activity and transactions totaling more
than $5.4 billion, most of which related
to a new remote deposit capture service.
• Wire activity totaling more than $7.9
billion with foreign customers also was
not sufficiently monitored.
Lesson from Zion’s
• It is always better to admit when wrong,
correct action, and accept the consequences.
• It is better to take action than to REACT. Do not
react out of FEAR. FEAR causes some to react in
harmful ways that they normally would not.
• Stay on top of your program. The word “lax” is
not in our vocabulary. When you implement a
new product or service you MUST monitor and
audit.
• Be well prepared, consult with legal counsel
and others, be ready for those fiery darts!
Training Is SMART
• Training is a profitable tool and a smart
work strategy.
• Training is VITAL. Breathes life into your
program policy and procedures.
• Who and How often are you training?
• Are you leaving anyone out that needs
teaching on the program and contents?
Training Is SMART
• Is training tailored to your organization or just
a template of a law and regulation?
• What type of resources and material are you
using? Can you do it better and perhaps
cheaper?
• A way to develop the full potential of the
staff. Give someone else the opportunity to
train so they can learn more.
• Many people want additional training and desire
to advance.
Training Is SMART
• Are you helping them advance or waiting
to get the time to train?
• Make the time, make it interesting. All
benefit in the end!
• Board of Directors
• Invite others to attend our AMLA
meetings. Gives them opportunity to
network and hear what others are doing.
The Power & Authority
• You have been delegated the power and
authority to get the work done.
• How are you using that position of power
and authority in your organization?
• Do not rule with a rod (tyrant boss, hands
off) engage your team and encourage
daily. You will accomplish more!
Manage and Delegate
• Your manage style is important! Can
build up or tear down.
• Develop a reputation as a department
that is a good place to work and
opportunity for promotion.
• Spend time to train up those under you so
they can take on more and excel in their
position.
The On-Going Challenge
• The criminal methods and players may
change some. Range from complex
financial transactions, carried out
through webs of wire transfers and
networks of shell companies, to old
fashioned suitcase of money (bulk cash
smuggling).
The On-Going Challenge
• Law enforcement learns of a new
laundering technique, takes action to
disrupt, the launderers replace the
scheme with another more sophisticated
method.
• Your best weapon is to STAY Informed.
• Complete task by using the means you
have and with greater zeal.
The On-Going Challenge
• Remember: There will be some
major victories which demoralize
and deflate the opposition.
• We are making a difference. A
little light is better than none at
all!
The On-Going Challenge
The battle is on-going but VICTORY is YOURS.
FinCEN and Chapter X
• March 2011 is around the corner.
• Regulations remain under 31 CFR Part 103 until
then.
• To help facilitate the transition for financial
institutions, Chapter X page on FinCEN website
which includes helpful information
• Chapter X Frequently Asked Questions.
• FinCEN is also making available a Web tool
which will translate a regulatory citation from
31 CFR Part 103 to 31 CFR Chapter X and vice
versa.
CTR and SAR Data
• FinCEN is continuing the design of a new Bank
Secrecy Act database and invites comment on
the list of proposed data fields within the
Database that will be required to support
unified CTR and SAR filings by seeking input
from the financial community on technical
matters.
• FinCEN transitions from a paper system to a
dynamic IT environment for electronic
reporting.
Upcoming BSA Challenges
• Info from FinCEN speaker Jamal El-Hindi, Associate Director for
Regulatory Policy and Programs, event hosted by Deloitte on Jan
12, 2011.
• SAR confidentiality and concerns. The fact that
in California a conviction was announced in
disclosing a SAR.
• FinCEN takes seriously and works with Justice
on these issues. Quote from director Freis (at
DOJ) about how serious they take the issue of
all parties having responsibility (government
and FI’s) for keeping confidential.
BSA Challenges
• Not a problem as you have adequate
controls in place for SAR confidentiality
and sharing with law enforcement and
regulators.
• SAR sharing between affiliates. A phase
approach…left room for situations for
future, more comfortable being more
permissive of sharing within FI, affiliates.
BSA Challenges
• Clarified that SAR sharing in
domestic affiliates only (currently
engaging in international work with
Egmont and others to be
comfortable with SARs being shared
across border affiliates).
• Makes sense to me.
BSA Challenges
• Not a problem: For now we are
to share in accordance to the
regulatory guidance that the
sharing is consistent with the
BSA. Domestic only and not
international affiliates.
BSA Challenges
• Status of unified SARS-one consolidated
format.
• Will enhance FinCEN capability to sort
through the data points. Making some
progress based on input from the private
sector and government officials. Period
closed for comments.
BSA Challenges
• Time to respond and work with form for
the industry to develop software needed
to start using form.
• Taking longer than anticipated. SAR
modernization target date is still June
2012 to make new form live.
BSA Challenges
• I like this approach: This spring will do
next phase and will provide coding and
software to the industry instead of
them purchasing on their own.
• Intend to provide the industry with more
to work with so they will have to do less
this time around when putting in place
their systems to work on their forms. Will
be easier and fewer problems!
BSA Challenges
• Phase in approach for those using the old
form.
• Those that are doing the E-filing now it is
going to be easier for the transition down
the road!
• Helpful for FinCEN and industry transition
will be easier. Do E-Filing if you are not.
Now is the time.
BSA Challenges
•
•
Cross Border Proposal: Reporting process is
reasonable. There is a Congressional directive
to determine if this is feasible.
Timing and FinCEN capacity to receive and to
certify to congress that they have the capacity.
Business planning for FI’s, in process of
modernizing their IT systems at FinCEN. 2012
at least a time period as far as moving
forward.
BSA Challenges
• ITIN information reporting-others (IRS)
involved, considering tax revenue and
cross border.
• Prudent business practice to put the
two concepts together in one system to
collect the ITIN information.
• Working together, collective effort as a
matter of good government.
BSA Challenges
• Rulemaking: many comments and do not
know which direction it will be headed.
• Recap: More work to be done in this area.
Stay Tuned.
BSA Challenges
• Prepaid Access Proposal timing and significant
issues.
• A phase approach because of all the complex
issues related to this product. Tough issue and a
lot of focus on the definitions and preciseness.
Who the provider will be? Looking at this
seriously.
• Concern on how folding sellers into the
program will work and how they can approach.
Under considerable time crunch and pressure to
work on as fast as they can.
BSA Challenges
• Hedge fund and investment advisors:
plans for these two sectors and rules.
Investment advisors is the focus now.
• FinCEN will propose a NPR to bring the IA
in the scope of the regulations. Dodd
Frank and SEC Rulemaking will have an
effect and FinCEN looking at these now.
• Gaps in the hedge funds that are
remaining they will have to consider.
BSA Challenges
• Beneficial Ownership: FinCEN issued guidance
March 5, 2010 on the types of documents and
information that you may want to obtain in
order to identify and verify certain customer
accounts and relationships
• A need for a rule : considering that now.
Hearing from industry a need for greater clarity
in the form of a rule and the need for a level
playing field. A regulation is needed…perhaps?
BSA Challenges
• OTHER: 314a-revised to international
LE….has that gone as expected.
• Not overwhelmed on the International
front and outreach from colleagues on
how this can work.
• Have done some non-federal requests.
Had to set up in accordance to our
treaties.
BSA Challenges
• Enforcement action against MSBs failing
to register with FinCEN. Baltic Financial
Services, Inc. Montclair, NJ ($12M)
• A different approach now then before.
• Will continue to do outreaches.
• Actors that are choosing not to register.
They do need to take action. A failure to
register will be acted upon and a civil
penalty can be assessed.
MSB-FinCEN Site
• There nonetheless remain some MSBs that
continue to flout the law and ignore the
basic registration requirements. In
appropriate cases, FinCEN will seek to
exercise its regulatory authority to issue
civil money penalties for failure to
register as an MSB.
MSB-FinCEN Site
• Law enforcement and regulatory
authorities are encouraged to report to
FinCEN persons suspected of being an
unregistered MSB by contacting FinCEN
through normal channels or by calling
Fincen's Regulatory Helpline at 1-800-9492732.
MSB FinCEN Site
• "Whoever knowingly conducts, controls,
manages, supervises, directs, or owns all
or part of an unlicensed money
transmitting business, shall be fined in
accordance with this title or imprisoned
not more than 5 years, or both."
[18 U.S.C. 1960 (a)]
BSA Challenges
• SEC no action letter Broker-dealers that
rely on investment advisers (IA) to
perform customer identification program
(“CIP”) requirements now have new
conditions that must be met before May
1, 2011. FinCEN supportive of that
process issued for IA for reliance in
relationship to CIP.
BSA Challenges
• Letter identifies some additional
conditions, clarification of some issues.
• Broker-dealers need to ensure that their
procedures and reliance agreements
address each of the conditions imposed in
the 2011 Letter.
BSA Challenges
• FinCEN has to focus on other areas such
as non bank mortgage brokers.
• Will have to leverage others to help
enforce rules.
• Seeking industry comments on how this
should work. Challenge for FinCEN.
FinCEN Thanks You
• Closing Comment: FinCEN is very
appreciative that you are
supporting their mission as you
stand in the forefronts.
Do You Have Some Ideas?
• I bet you ALL do!
• Please share some of your work strategies
and ideas with your peers! We are in this
together.
• Post on our AMLA website under the user
forum.
• SHARE, SHARE, SHARE. That is why we
are here.
Other Important Items
• The monthly regulatory updates are
posted on website at www.theamla.com
under the user forum tab.
• We are meeting in Virginia next month with
their ¼ BSA Roundtable Group. A speaker
from FinCEN is being scheduled. Webinar
will be available.
Save the Date
• Planning one day fraud event in the SE
region August 12, 2011. Central Florida
area in conjunction with Saltmarsh,
Cleaveland & Gund, PA.
• Planning one day event in the Chicago IL
area on May 6, 2011.
• March 11, 2011 MidAtlantic Chapter Event
Sponsors
•Thank you to Old Florida
National Bank for sponsoring
today’s event.
Thank you
•Have a wonderful day. Go
forth in confidence and
courage to press in and fight
the good fight!