Risk Management Manual of Examination Policies - FDIC

BANK SECRECY ACT, ANTI-MONEY LAUNDERING,
AND OFFICE OF FOREIGN ASSETS CONTROL
Treasury regulation 31 CFR 103.59 notifies institutions
that they can be subject to criminal penalties if convicted
for willful violations of the BSA of not more than $1,000
and/or one year in prison. If such a BSA violation is
committed to further any other Federal law punishable by
more than a year in prison (such as fraud, money
laundering, theft, illegal narcotics sales, etc.) then harsher
penalties can be imposed. In these cases, the perpetrator,
upon conviction, can be fined not more than $10,000
and/or be imprisoned not more than 5 years.
In addition, criminal penalties may also be charged against
any person who knowingly makes any false, fictitious, or
fraudulent statement or representation in any BSA report.
Upon conviction of such an act, the perpetrator may be
fined not more than $10,000 and/or imprisoned for 5 years.
Certain violations of the BSA allow for the U.S.
Government to seize the funds related to the crime. The
USA PATRIOT Act amended the BSA to provide for
funds forfeiture in cases dealing with foreign crimes, U.S.
interbank accounts, and in connection with some currency
transaction reporting violations. Furthermore, the U.S.
Government can seize currency or other monetary
instruments physically transported into or out of the U.S.
when required BSA reports go unfiled or contain material
omissions or misstatements.
Supervisory Actions
The FDIC has the authority to address less than adequate
compliance with the BSA through various formal or
informal administrative actions. If a specific violation of
Section 326.8 or 31 CFR 103 is not corrected or the same
provision of a regulation is cited from one examination to
the next, Section 8(s) of the FDI Act requires the FDIC to
consider formal enforcement action as described in Section
8(b) or 8(c) of the FDI Act. However, the FDIC has
determined that informal enforcement action, such as a
Board Resolution or a Memorandum of Understanding
may be a more appropriate supervisory response, given
related circumstances and events, which may serve as
mitigating factors.
Violations of a technical and limited nature would not
necessarily reflect an inadequate BSA program; as such, it
is important to look at the type and number of violations
before determining the appropriate administrative action.
If the Regional Office reviews a case with significant
violations, it should determine whether an enforcement
action is necessary. Under such circumstances, if the
Regional Office determines that a Cease and Desist action
is not appropriate, then documentation supporting that
Section 8.1
decision should be maintained at the Regional Office and a
copy of that documentation submitted to the Special
Activities Section in Washington, D.C.
Memoranda of Understanding (MOU) and
Board Resolutions (BBR)
In certain cases, the Regional Office may determine that a
BBR or a MOU is an appropriate action to deal with an
institution’s BSA weaknesses. BBRs should only be used
in circumstances where recommendations are minor and do
not affect the overall adequacy of the institution’s BSA
compliance program. Unlike a BBR, a MOU is a bi-lateral
agreement between the financial institution and the FDIC.
When the Regional Office deems that a MOU is
appropriate, the examiners, reviewer, the Regional SACM,
and the Regional legal department may work together to
formulate the provisions of the action and obtain
appropriate approvals as soon as possible after the
examination.
Cease and Desist Orders
Section 8(s) of the FDI Act grants the FDIC the power to
issue Cease and Desist Orders solely for the purpose of
correcting BSA issues at state nonmember banks. In
situations where BSA/AML program weaknesses expose
the institution to an elevated level of risk to potential
money laundering activity, are repeatedly cited at
consecutive examinations, or demonstrate willful
noncompliance or negligence by management, a Section
8(b) Order to Cease and Desist should be considered by the
Regional Office. Cases referred to FinCEN for civil
money penalties should also be reviewed for formal
supervisory action.
When a Cease and Desist Order is deemed to be
appropriate, the examiners, reviewer, the Regional SACM,
and the Regional legal department should work together to
formulate the provisions of the action and obtain
appropriate approvals as soon as possible after the
examination. Specific details are contained in the Formal
and Informal Actions Procedures (FIAP) Manual.
Removal/Prohibition Orders
If deficiencies or apparent violations of Section 326.8 or
31 CFR 103 involve negligent or egregious action or
inaction by institution-affiliated parties (IAPs), other
formal actions may be appropriate. In such situations
where the IAP exposes the institution to an elevated risk of,
or has facilitated or participated in actual transactions
involving money laundering activity, utilization of Section
DSC Risk Management Manual of Examination Policies 8.1-37 Bank Secrecy Act (12-04)
Federal Deposit Insurance Corporation