Risk Management Manual of Examination Policies - FDIC

BANK SECRECY ACT, ANTI-MONEY LAUNDERING,
AND OFFICE OF FOREIGN ASSETS CONTROL
well as the relevant statutory and regulatory
requirements placed on the foreign bank to identify
and monitor the transactions of its own customers by
its home country supervisory authorities.
• Monitor account activities conducted in the PTAs with
foreign banks and report suspicious or unusual activity
in accordance with Federal regulations.
Termination of PTAs
It is recommended the U.S. banking entity terminate a PTA
with a foreign bank as expeditiously as possible in the
following situations:
• Adequate information about the ultimate users of the
PTAs cannot be obtained.
• The U.S. banking entity cannot adequately rely on the
home country supervisor to require the foreign bank to
identify and monitor the transactions of its own
customers.
• The U.S. banking entity is unable to ensure that its
PTAs are not being used for money laundering or
other illicit purposes.
• The U.S. banking entity identifies ongoing suspicious
and unusual activities dominating the PTA
transactions.
Private Banking Activities
Private banking has proven to be a profitable operation and
is a fast-growing business in U.S. financial institutions.
Although the financial service industry does not use a
standard definition for private banking, it is generally held
that private banking services include an array of allinclusive
deposit account, lending, investment, trust, and
cash management services offered to high net worth
customers and their business interests. Not all financial
institutions operate private banking departments, but they
typically offer special attention to their best customers and
ensure greater privacy concerning the transactions and
activities of these customers. Smaller institutions may
offer similar services to certain customers while not
specifically referring to this activity as private banking.
Confidentiality is a vital element in administering private
banking relationships. Although customers may choose
private banking services to manage their assets, they may
also seek confidential ownership of their assets or a safe,
legal haven for their capital. When acting as a fiduciary,
financial institutions may have statutory, contractual, or
ethical obligations to uphold customer confidentiality.
Typically, a private banking department will service a
financial institution’s wealthy foreign customers, as these
Section 8.1
customers may be conducting more complex transactions
and using services that facilitate international transactions.
Because of these attributes, private banking also appeals to
money launderers.
Examiners should evaluate the financial institution
management’s ability to measure and control the risk of
money laundering in the private banking area and
determine if adequate AML policies, procedures, and
oversight are in place to ensure compliance with laws and
regulations and adequate identification of suspicious
activities.
Policy Recommendations
At a minimum, the financial institution’s private banking
policies and procedures should address:
• Acceptance and approval of private banking clients;
• Desired or targeted client base;
• Products and services that will be offered;
• Effective account opening procedures and
documentation requirements; and
• Account review upon opening and ongoing thereafter.
In addition, the financial institution must:
• Document the identity and source of wealth on all
customers requesting custody or private banking
services;
• Understand each customer’s net worth, account needs,
as well as level and type of expected activity;
• Verify the source and accuracy of private banking
referrals;
• Verify the origins of the assets or funds when
transactions are received from other financial service
providers;
• Review employment and business information, income
levels, financial statements, net worth, and credit
reports; and
• Monitor the account relationship by:
o Reviewing activity against customer profile
expectations,
o Investigating extraordinary transactions,
o Maintaining an administrative file
documenting the customer’s profile and
activity levels,
o Maintaining documentation that details
personal observations of the customer’s
business and/or personal life, and
o Ensuring that account reviews are completed
periodically by someone other than the
private banking officer.
Bank Secrecy Act (12-04) 8.1-24 DSC Risk Management Manual of Examination Policies
Federal Deposit Insurance Corporation