BSA/AML Examination Manual - ffiec

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Appendix F: Money Laundering and Terrorist Financing “Red Flags” • Funds transfer activity is unexplained, repetitive, or shows unusual patterns. • Payments or receipts with no apparent links to legitimate contracts, goods, or services are received. • Funds transfers are sent or received from the same person to or from different accounts. • Funds transfers contain limited content and lack related party information. Automated Clearing House Transactions • Large-value, automated clearing house (ACH) transactions are frequently initiated through third-party service providers (TPSP) by originators that are not bank customers and for which the bank has no or insufficient due diligence. • TPSPs have a history of violating ACH network rules or generating illegal transactions, or processing manipulated or fraudulent transactions on behalf of their customers. • Multiple layers of TPSPs that appear to be unnecessarily involved in transactions. • Unusually high level of transactions initiated over the Internet or by telephone. • National Automated Clearing House Association (NACHA) information requests indicate potential concerns with the bank’s usage of the ACH system. Activity Inconsistent with the Customer’s Business • The currency transaction patterns of a business show a sudden change inconsistent with normal activities. • A large volume of cashier’s checks, money orders, or funds transfers is deposited into, or purchased through, an account when the nature of the accountholder’s business would not appear to justify such activity. • A retail business has dramatically different patterns of currency deposits from similar businesses in the same general location. • Unusual transfers of funds occur among related accounts or among accounts that involve the same or related principals. • The owner of both a retail business and a check-cashing service does not ask for currency when depositing checks, possibly indicating the availability of another source of currency. • Goods or services purchased by the business do not match the customer’s stated line of business. FFIEC BSA/AML Examination Manual F–3 8/24/2007
Appendix F: Money Laundering and Terrorist Financing “Red Flags” • Payments for goods or services are made by checks, money orders, or bank drafts not drawn from the account of the entity that made the purchase. Lending Activity • Loans secured by pledged assets held by third parties unrelated to the borrower. • Loan secured by deposits or other readily marketable assets, such as securities, particularly when owned by apparently unrelated third parties. • Borrower defaults on a cash-secured loan or any loan that is secured by assets which are readily convertible into currency. • Loans are made for, or are paid on behalf of, a third party with no reasonable explanation. • To secure a loan, the customer purchases a certificate of deposit using an unknown source of funds, particularly when funds are provided via currency or multiple monetary instruments. • Loans that lack a legitimate business purpose, provide the bank with significant fees for assuming little or no risk, or tend to obscure the movement of funds (e.g., loans made to a borrower and immediately sold to an entity related to the borrower). Changes in Bank-to-Bank Transactions • The size and frequency of currency deposits increases rapidly with no corresponding increase in noncurrency deposits. • A bank is unable to track the true accountholder of correspondent or concentration account transactions. • The turnover in large-denomination bills is significant and appears uncharacteristic, given the bank’s location. • Changes in currency-shipment patterns between correspondent banks are significant. Cross-Border Financial Institution Transactions 242 • U.S. bank increases sales or exchanges of large denomination U.S. bank notes to Mexican financial institution(s). • Large volumes of small denomination U.S. banknotes being sent from Mexican casas de cambio to their U.S. accounts via armored transport or sold directly to U.S. banks. These sales or exchanges may involve jurisdictions outside of Mexico. 242 FinCEN Advisory FIN-2006-A003, Guidance to Financial Institutions on the Repatriation of Currency Smuggled into Mexico from the United States, April 28, 2006. FFIEC BSA/AML Examination Manual F–4 8/24/2007
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Bank Secrecy Act / Anti-Money Laund
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Table of Contents EXPANDED EXAMINAT
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INTRODUCTION Introduction This Fede
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Background Introduction In 1970, Co
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Introduction institutions, such as
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Introduction proliferation of weapo
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Introduction Although the motivatio
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Scoping and Planning — Overview C
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Scoping and Planning — Overview T
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Scoping and Planning — Examinatio
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Scoping and Planning — Examinatio
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BSA/AML Risk Assessment — Overvie
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Analysis of Specific Risk Categorie
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BSA/AML Risk Assessment — Examina
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BSA/AML Compliance Program — Over
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BSA/AML Compliance Program — Exam
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Developing Conclusions and Finalizi
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Developing Conclusions and Finalizi
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Customer Identification Program —
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Customer Information Required Custo
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Transaction Testing Customer Identi
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Customer Due Diligence — Overview
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Customer Due Diligence — Examinat
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Suspicious Activity Reporting — O
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Law Enforcement Inquiries and Reque
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Timing of a SAR Filing Suspicious A
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Suspicious Activity Reporting — E
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Suspicious Activity Reporting — E
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Currency Transaction Reporting —
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Currency Transaction Reporting —
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Currency Transaction Reporting Exem
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• Operating a pawn brokerage. Cur
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Currency Transaction Reporting Exem
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Information Sharing — Overview In
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Information Sharing — Overview su
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Information Sharing — Overview es
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Copies of section 314(a) requests.
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Purchase and Sale of Monetary Instr
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Funds Transfers Recordkeeping — O
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Funds Transfers Recordkeeping — O
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Responsibilities of Beneficiary’s
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Funds Transfers Recordkeeping — E
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Foreign Correspondent Account Recor
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Private Banking Due Diligence Progr
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Special Measures — Overview minim
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Examination Procedures Special Meas
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Foreign Bank and Financial Accounts
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International Transportation of Cur
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Office of Foreign Assets Control
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Page 147 and 148:
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Enterprise-Wide BSA/AML Compliance
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Corporate management. Enterprise-Wi
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Foreign Branches and Offices of U.S
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Examination Procedures Parallel Ban
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Correspondent Accounts (Domestic)
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Correspondent Accounts (Foreign)
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Correspondent Accounts (Foreign)
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U.S. Dollar Drafts — Overview U.S
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U.S. Dollar Drafts — Examination
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Payable Through Accounts — Overvi
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Payable Through Accounts — Examin
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Payable Through Accounts — Examin
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Risk Mitigation Pouch Activities
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Pouch Activities — Examination Pr
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Electronic Banking — Overview lin
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Examination Procedures Electronic B
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Funds Transfers — Overview and on
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Funds Transfers — Overview busine
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Examination Procedures Funds Transf
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Automated Clearing House Transactio
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Transaction Testing Automated Clear
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Electronic Cash — Overview Using
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Third-Party Payment Processors —
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Third-Party Payment Processors —
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Brokered Deposits — Overview Brok
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Examination Procedures Brokered Dep
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Privately Owned Automated Teller Ma
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• Expected account activity, incl
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Privately Owned ATMs — Examinatio
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Nondeposit Investment Products —
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Nondeposit Investment Products —
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− Holdings in excess of the custo
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Insurance — Overview its insuranc
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Examination Procedures Insurance In
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Concentration Accounts — Overview
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Concentration Accounts — Examinat
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Lending Activities — Overview bus
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Trade Finance Activities — Overvi
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Risk Mitigation Trade Finance Activ
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Trade Finance Activities — Overvi
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Private Banking — Overview Privat
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Customer Risk Assessment Private Ba
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Private Banking — Overview determ
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Offshore entities. Cash-intensive b
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Trust and Asset Management Services
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• The type of trust or agency acc
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Transaction Testing Trust and Asset
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Nonresident Aliens and Foreign Indi
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Nonresident Aliens and Foreign Indi
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Politically Exposed Persons — Ove
Page 271 and 272: Politically Exposed Persons — Ove
Page 273 and 274: Politically Exposed Persons — Exa
Page 275 and 276: Embassy and Foreign Consulate Accou
Page 277 and 278: Embassy and Foreign Consulate Accou
Page 279 and 280: Non-Bank Financial Institutions —
Page 287 and 288: Professional Service Providers —
Page 289 and 290: Professional Service Providers —
Page 291 and 292: Non-Governmental Organizations and
Page 293 and 294: Non-Governmental Organizations and
Page 295 and 296: Business Entities (Domestic and For
Page 297 and 298: Risk Factors Business Entities (Dom
Page 303 and 304: Cash-Intensive Businesses — Overv
Page 305 and 306: Appendix A: BSA Laws and Regulation
Page 311 and 312: Appendix B: BSA/AML Directives Appe
Page 313 and 314: Web Sites Appendix C: BSA/AML Refer
Page 315 and 316: Appendix C: BSA/AML References •
Page 317 and 318: Appendix D: Statutory Definition of
Page 319 and 320: Appendix E: International Organizat
Page 321: Appendix F: Money Laundering and Te
Page 325 and 326: Privately Owned Automated Teller Ma
Page 327 and 328: Appendix F: Money Laundering and Te
Page 329 and 330: Funds Transfers Appendix F: Money L
Page 331 and 332: Appendix G: Structuring However, tw
Page 333 and 334: Appendix H: Request Letter Items (C
Page 339 and 340: Expanded Examination Procedures App
Page 341 and 342: Parallel Banking _ List any paralle
Page 351 and 352: Appendix I: Risk Assessment Link to
Page 353 and 354: Appendix J: Quantity of Risk Matrix
Page 355 and 356: Appendix K: Customer Risk versus Du
Page 357 and 358: When did the suspicious activity ta
Page 359 and 360: Low No history of OFAC actions. No
Page 361 and 362: Appendix O: Examiner Tools for Tran
Page 363 and 364: Appendix O: Examiner Tools for Tran
Page 365 and 366: Signature Cards Appendix P: BSA Rec
Page 367 and 368: Name and address of the beneficiary
Page 369 and 370: Appendix P: BSA Record Retention Re
Page 371 and 372: Acronym or abbreviation Full name E
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Acronym or abbreviation Full name N
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Appendix R: Enforcement Guidance Ap
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Appendix R: Enforcement Guidance As
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Appendix R: Enforcement Guidance ex
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Appendix R: Enforcement Guidance FF
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Backfiling. See Currency Transactio
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overview, 165-167 request letter it
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money services businesses, 279 nond
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Export Administration Act of 1979,
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Index 314(a) record searches, 88 Cu
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Index for a BSA/AML compliance prog
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guidance on providing banking servi
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247, 253, H-15 Offshore Financial C
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trade finance activities, H-14 trus
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enterprise-wide, 149-150, 152, 153
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U United Nations, 7, 137 Updating O
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