Risk Management Manual of Examination Policies - FDIC

BANK SECRECY ACT, ANTI-MONEY LAUNDERING,
AND OFFICE OF FOREIGN ASSETS CONTROL
8(e) of the FDI Act, a removal/prohibition action, should
be considered.
In cases where apparent violations of Section 326.8 and/or
31 CFR Section 103 have been committed by an IAP(s)
and appear to involve criminal intent, examiners should
contact the Regional SACM or other designees about filing
a SAR on the IAP(s). If the involvement of the IAP(s) in
the criminal activity warrants, the Regional Office should
also consider contacting the Federal Bureau of
Investigation (FBI) or other Federal law enforcement
agency via phone or letter to provide them a referral of the
SAR and indicate the FDIC’s interest in pursuit of the case.
IDENTIFICATION OF SUSPICIOUS
TRANSACTIONS
Effective BSA/AML compliance programs include
controls and measures to identify and report suspicious
transactions in a timely manner. An institution should have
in place a CDD program sufficient to be able to make an
informed decision about the suspicious nature of a
particular transaction. This section highlights unusual or
suspicious activities and transactions that may indicate
potential money laundering through structured transactions,
terrorist financing, and other schemes designed for illicit
purposes. Often, individuals involved in suspicious
activity will use a combination of several types of unusual
transactions in an attempt to confuse or mislead anyone
attempting to identify the true nature of their activities.
Structuring is the most common suspicious activity
reported to FinCEN. Structuring is defined as breaking
down a sum of currency that exceeds the $10,000 CTR
reporting level per the regulation, into a series of
transactions at or less than $10,000. The transactions do
not need to occur on any single day in order to constitute
structuring. Money launderers have developed many ways
to structure large amounts of cash to evade the CTR
reporting requirements. Examiners should be alert to
multiple cash transactions that exceed $10,000, but may
involve other monetary instruments, bank official checks,
travelers’ checks, savings bonds, loans and loan payments,
or even securities transactions as the offsetting entry. The
transactions could also involve the exchange of small bank
notes for large ones, but in amounts less than $10,000.
Structuring of cash transactions to evade CTR filing
requirements is often the easiest of suspicious activities to
identify. It is subject to criminal and civil violations of the
BSA regulations as implemented within 31 CFR 130.63.
This regulation states that any person who structures or
assists in structuring a currency transaction at a financial
institution for the purpose of evading CTR reporting, or
Section 8.1
causes or attempts to cause a financial institution to fail to
file a CTR, or causes the financial institution to file a CTR
that contains a material omission or misstatement of fact, is
subject to the criminal and civil violations of the BSA
regulations. Financial institutions are required by the BSA
to have monitoring procedures in place to identify
structured transactions.
Knowledge of the three stages of money laundering
(discussed below) has multiple benefits for financial
institutions. These benefits include, but are not limited to,
the following:
• Identification and reporting of illicit activities to
FinCEN,
• Prevention against losses stemming from fraud,
• Prevention against citation of apparent violations of
BSA and SAR regulations, and
• Prevention against assessment of CMPs by FinCEN
and/or the FDIC.
The following discussions and “red flag” lists, while not
all-inclusive, identify various types of suspicious
activity/transactions. These lists are intended to serve as a
reference tool and should not be used to make immediate
and definitive conclusions that a particular activity or
series of transactions is illegal. They should be viewed as
potentially suspicious warranting further review. The
activity/transactions may not be suspicious if they are
consistent with a customer’s legitimate business.
The Three Stages of Money Laundering
There are three stages in typical money laundering
schemes:
1. Placement,
2. Layering, and
3. Integration.
Placement
Placement, the first stage of money laundering, involves
the placement of bulk cash into the financial system
without the appearance of being connected to a criminal
activity. There are many ways cash can be placed into the
system. The simplest way is to deposit cash into a
financial institution; however, this is also one of the riskier
ways to get caught laundering money. To avoid notice,
banking transactions involving cash are likely to be
conducted in amounts under the CTR reporting thresholds;
this activity is referred to as “structuring.”
Bank Secrecy Act (12-04) 8.1-38 DSC Risk Management Manual of Examination Policies
Federal Deposit Insurance Corporation