Risk Management Manual of Examination Policies - FDIC

BANK SECRECY ACT, ANTI-MONEY LAUNDERING,
AND OFFICE OF FOREIGN ASSETS CONTROL
information. Refer to the discussions provided above and
within “Section 314(a) – Mandatory Information Sharing
Between the U.S. Government and Financial Institutions”
for detailed guidance on:
• SAR Filings and
• Confidentiality of Section 314(a) Requests (including
the embedded discussion entitled “Internal Financial
Institution Measures for Protecting Section 314(a)
Requests”).
Actions taken pursuant to shared information do not affect
a financial institution’s obligations to comply with all BSA
and OFAC rules and regulations. For example, a financial
institution is still obligated to immediately contact law
enforcement and its Federal regulatory agency, by
telephone, when a significant reportable violation requiring
immediate attention (such as one that involves the
financing of terrorist activity or is of an ongoing nature) is
being conducted; thereafter, a timely SAR filing is still
required.
FinCEN has provided financial institutions with general
instructions, registration forms, FAQs, and additional
guidance relating to the Section 314(b) information sharing
process. These documents are revised periodically and
may be found on FinCEN’s website.
CUSTOMER DUE DILIGENCE (CDD)
The cornerstone of strong BSA/AML programs is the
adoption and implementation of comprehensive CDD
policies, procedures, and controls for all customers,
particularly those that present a higher risk for money
laundering and terrorist financing. The concept of CDD
incorporates and builds upon the CIP regulatory
requirements for identifying and verifying a customer’s
identity.
The goal of a CDD program is to develop and maintain an
awareness of the unique financial details of the institution’s
customers and the ability to relatively predict the type and
frequency of transactions in which its customers are likely
to engage. In doing so, institutions can better identify,
research, and report suspicious activity as required by BSA
regulations. Although not required by statute or regulation,
an effective CDD program provides the critical framework
that enables the institution to comply with regulatory
requirements.
Benefits of an Effective CDD Program
Section 8.1
An effective CDD program protects the reputation of the
institution by:
• Preventing unusual or suspicious transactions in a
timely manner that potentially exposes the institution
to financial loss or increased expenses;
• Avoiding criminal exposure from individuals who use
the institution’s resources and services for illicit
purposes; and
• Ensuring compliance with BSA regulations and
adhering to sound and recognized banking practices.
CDD Program Guidance
CDD programs should be tailored to each institution’s
BSA/AML risk profile; consequently, the scope of CDD
programs will vary. While smaller institutions may have
more frequent and direct contact with customers than their
counterparts in larger institutions, all institutions should
adopt and follow an appropriate CDD program.
An effective CDD program should:
• Be commensurate with the institution’s BSA/AML
risk profile, paying particular attention to higher risk
customers,
• Contain a clear statement of management’s overall
expectations and establish specific staff
responsibilities, and
• Establish monitoring systems and procedures for
identifying transactions or activities inconsistent with a
customer’s normal or expected banking activity.
Customer Risk
As part of an institution’s BSA/AML risk assessment,
many institutions evaluate and apply a BSA/AML risk
rating to its customers. Under this approach, the institution
will obtain information at account opening sufficient to
develop a “customer transaction profile” that incorporates
an understanding of normal and expected activity for the
customer’s occupation or business operations. While this
practice may not be appropriate for all institutions,
management of all institutions should have a thorough
understanding of the money laundering or terrorist
financing risks of its customer base and develop and
implement the means to adequately mitigate these risks.
Due Diligence for Higher Risk Customers
Customers that pose higher money laundering or terrorist
financing risks present increased exposure to institutions.
Due diligence for higher risk customers is especially
DSC Risk Management Manual of Examination Policies 8.1-17 Bank Secrecy Act (12-04)
Federal Deposit Insurance Corporation