Risk Management Manual of Examination Policies - FDIC

BANK SECRECY ACT, ANTI-MONEY LAUNDERING,
AND OFFICE OF FOREIGN ASSETS CONTROL
Generally, a referral should be considered when the types
and nature of apparent violations of the BSA result from a
nonexistent or seriously deficient BSA and anti-money
laundering compliance program; expose the financial
institution to a heightened level of risk for potential money
laundering activity; or demonstrate a willful or flagrant
disregard for the requirements of the BSA. Normally,
isolated incidences of noncompliance should not be
referred for penalty consideration. Even if the type of
violation was cited previously, referral would not be
appropriate if the apparent violations involved are genuine
misunderstandings of the BSA requirements or inadvertent
violations, the deficiencies are correctable in the normal
course of business and proper corrective action has been
taken or committed to by management.
A referral may be warranted in the absence of previous
violations if the nature of apparent violations identified at
the current examination is serious. An example would be
failing to file FinCEN Form 104, Currency Transaction
Report, on nonexemptible businesses or businesses that,
while exemptible, FinCEN, as a matter of policy will not
authorize the financial institution to exempt. To illustrate,
the failure to file CTRs on transactions involving an
individual or automobile dealer (both nonexemptible) is of
greater concern to FinCEN than a failure to file CTRs on a
recently opened supermarket which has not yet been added
to the bank’s exempt list or a golf course where the
financial institution believed that it qualified for a
unilateral exemption as a sports arena. This doesn’t mean
that the failure to file CTRs on a supermarket should never
be referred. Failure to file CTRs on a supermarket that is a
front for organized crime, that has no customers yet has
large receipts, or that has currency transaction activity that
far exceeds its expected revenues would warrant referral.
Mitigating Factors to Consider
Other considerations in, deciding whether to recommend
criminal/civil penalties include the financial institution’s
past history of compliance, and whether the current system
of policies, procedures, systems, internal controls, and
training are sufficient to ensure a satisfactory level in the
future. Senior management’s attitude and commitment
toward compliance as evidenced by their involvement and
devotion of resources to compliance programs should also
be considered. Any mitigating factors should be given full
consideration. Mitigating factors would include:
• The implementation of a comprehensive compliance
program that ensures a high level of compliance
including a system for aggregating currency
transactions.
Section 8.1
• Volunteer reporting by the institution of apparent
violations discovered on its own during the course of
internal audits. This does not apply to situations
where examiners disclose apparent violations and the
institution comes forward voluntarily to head off a
possible referral.
• Positive efforts to assist law enforcement, including
the reporting of suspicious transactions and the filing
of Suspicious Activity Reports.
It should be noted that FinCEN does not categorize
violations as substantive or technical. However, FinCEN
does recognize the varying nature of violations and the fact
that not all violations require a referral.
Content of a Well-Developed Referral
A well-developed referral is one that contains sufficient
detail to permit FinCEN to ascertain: the number, nature
and severity of apparent violations cited; the overall level
of BSA compliance; the severity of any weaknesses in the
financial institution’s compliance program; and the
financial institution’s ability to achieve a satisfactory level
of compliance in the future.
A summary memorandum detailing these issues should be
prepared by the field examiner and submitted to the
Regional Office for review. At a minimum, each referral
should include a copy of this memorandum, the Report of
Examination pages that discuss BSA findings, and a civil
monetary penalty assessment. Documents contained in the
referral package need to be conclusion-oriented and
descriptive with facts supporting summary conclusions. It
is not sufficient to say that the financial institution has
written policies and procedures or that management
provides training to employees. Referrals are much more
useful when they discuss the specific deficiencies identified
within the compliance programs, policies and procedures,
systems, management involvement, and training.
Discussing the Referral Process with
Financial Institution Management
Examiners should not advise the financial institution that a
civil money penalty referral is being submitted to FinCEN.
If an investigation by law enforcement is warranted, it may
be compromised by disclosure of this information. It is
permissible to tell management that FinCEN will be
notified of all apparent violations of the BSA cited.
However, examiners are not to provide any oral or written
communication to the financial institution passing
judgment on the willfulness of apparent violations.
Criminal Penalties
Bank Secrecy Act (12-04) 8.1-36 DSC Risk Management Manual of Examination Policies
Federal Deposit Insurance Corporation