BSA/AML Examination Manual - ffiec

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Table of Contents Private Banking — Overview................................................................................. 247 Examination Procedures .................................................................................... 252 Trust and Asset Management Services — Overview ............................................. 254 Examination Procedures .................................................................................... 258 EXPANDED EXAMINATION OVERVIEW AND PROCEDURES FOR PERSONS AND ENTITIES.................................................................................................................... 260 Nonresident Aliens and Foreign Individuals — Overview..................................... 260 Examination Procedures .................................................................................... 262 Politically Exposed Persons — Overview (2007) ................................................. 264 Examination Procedures .................................................................................... 268 Embassy and Foreign Consulate Accounts — Overview....................................... 270 Examination Procedures .................................................................................... 272 Non-Bank Financial Institutions — Overview (2007)........................................... 274 Examination Procedures .................................................................................... 281 Professional Service Providers — Overview.......................................................... 283 Examination Procedures .................................................................................... 285 Non-Governmental Organizations and Charities — Overview............................. 287 Examination Procedures .................................................................................... 289 Business Entities (Domestic and Foreign) — Overview (2007) ........................... 290 Examination Procedures .................................................................................... 296 Cash-Intensive Businesses — Overview ................................................................ 298 Examination Procedures .................................................................................... 300 APPENDICES Appendix A: BSA Laws and Regulations .............................................................. A-1 Appendix B: BSA/AML Directives ....................................................................... B-1 Appendix C: BSA/AML References...................................................................... C-1 Appendix D: Statutory Definition of Financial Institution..................................... D-1 Appendix E: International Organizations................................................................E-1 Appendix F: Money Laundering and Terrorist Financing “Red Flags” (2007).....F-1 Appendix G: Structuring......................................................................................... G-1 Appendix H: Request Letter Items (Core and Expanded)...................................... H-1 Appendix I: Risk Assessment Link to the BSA/AML Compliance Program.........I-1 Appendix J: Quantity of Risk Matrix..................................................................... J-1 Appendix K: Customer Risk versus Due Diligence and Suspicious Activity Monitoring ........................................................................................ K-1 Appendix L: SAR Quality Guidance ......................................................................L-1 Appendix M: Quantity of Risk Matrix — OFAC Procedures ............................... M-1 Appendix N: Private Banking — Common Structure ............................................ N-1 Appendix O: Examiner Tools for Transaction Testing .......................................... O-1 Appendix P: BSA Record Retention Requirements ...............................................P-1 Appendix Q: Acronyms.......................................................................................... Q-1 Appendix R: Enforcement Guidance (2007) ........................................................ R-1 INDEX (2007) ........................................................................................................... Index-1 FFIEC BSA/AML Examination Manual iii 8/24/2007
INTRODUCTION Introduction This Federal Financial Institutions Examination Council (FFIEC) Bank Secrecy Act (BSA) /Anti-Money Laundering (AML) Examination Manual provides guidance to examiners for carrying out BSA/AML and Office of Foreign Assets Control (OFAC) examinations. An effective BSA/AML compliance program requires sound risk management; therefore, the manual also provides guidance on identifying and controlling risks associated with money laundering and terrorist financing. The manual contains an overview of BSA/AML compliance program requirements, BSA/AML risks and risk management expectations, industry sound practices, and examination procedures. The development of this manual was a collaborative effort of the federal banking agencies 1 and the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, to ensure consistency in the application of the BSA/AML requirements. In addition, OFAC assisted in the development of the sections of the manual that relate to OFAC reviews. Refer to Appendices A (“BSA Laws and Regulations”), B (“BSA/AML Directives”), and C (“BSA/AML References”) for guidance. Structure of Manual In order to effectively apply resources and ensure compliance with BSA requirements, the manual is structured to allow examiners to tailor the BSA/AML examination scope and procedures to the specific risk profile of the banking organization. The manual consists of the following sections: • Introduction. • Core Examination Overview and Procedures for Assessing the BSA/AML Compliance Program. • Core Examination Overview and Procedures for Regulatory Requirements and Related Topics. • Expanded Examination Overview and Procedures for an Enterprise-Wide Compliance Program and Other Structures. • Expanded Examination Overview and Procedures for Products and Services. • Expanded Examination Overview and Procedures for Persons and Entities. • Appendices. 1 The FFIEC was established in March 1979 to prescribe uniform principles, standards, and report forms and to promote uniformity in the supervision of financial institutions. The Council has six voting members: the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the State Liaison Committee. The Council’s activities are supported by interagency task forces and by an advisory State Liaison Committee, comprised of five representatives of state agencies that supervise financial institutions. FFIEC BSA/AML Examination Manual 1 8/24/2007
Page 1 and 2: Bank Secrecy Act / Anti-Money Laund
Page 3: Table of Contents EXPANDED EXAMINAT
Page 7 and 8: Background Introduction In 1970, Co
Page 9 and 10: Introduction institutions, such as
Page 11 and 12: Introduction proliferation of weapo
Page 13 and 14: Introduction Although the motivatio
Page 15 and 16: Scoping and Planning — Overview C
Page 17 and 18: Scoping and Planning — Overview T
Page 19 and 20: Scoping and Planning — Examinatio
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Page 23 and 24: BSA/AML Risk Assessment — Overvie
Page 27 and 28: Analysis of Specific Risk Categorie
Page 31 and 32: BSA/AML Risk Assessment — Examina
Page 33 and 34: BSA/AML Compliance Program — Over
Page 39 and 40: BSA/AML Compliance Program — Exam
Page 45 and 46: Developing Conclusions and Finalizi
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Page 49 and 50: Customer Identification Program —
Page 51 and 52: Customer Information Required Custo
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Customer Identification Program —
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Transaction Testing Customer Identi
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Customer Identification Program —
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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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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
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Politically Exposed Persons — Ove
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Politically Exposed Persons — Exa
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Embassy and Foreign Consulate Accou
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Embassy and Foreign Consulate Accou
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Non-Bank Financial Institutions —
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Professional Service Providers —
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Professional Service Providers —
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Non-Governmental Organizations and
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Non-Governmental Organizations and
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Business Entities (Domestic and For
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Risk Factors Business Entities (Dom
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Cash-Intensive Businesses — Overv
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Appendix A: BSA Laws and Regulation
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Appendix B: BSA/AML Directives Appe
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Web Sites Appendix C: BSA/AML Refer
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Appendix C: BSA/AML References •
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Appendix D: Statutory Definition of
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Appendix E: International Organizat
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Appendix F: Money Laundering and Te
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Privately Owned Automated Teller Ma
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Funds Transfers Appendix F: Money L
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Appendix G: Structuring However, tw
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Appendix H: Request Letter Items (C
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Expanded Examination Procedures App
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Parallel Banking _ List any paralle
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Appendix I: Risk Assessment Link to
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Appendix J: Quantity of Risk Matrix
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Appendix K: Customer Risk versus Du
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When did the suspicious activity ta
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Low No history of OFAC actions. No
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Appendix O: Examiner Tools for Tran
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Appendix O: Examiner Tools for Tran
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Signature Cards Appendix P: BSA Rec
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Name and address of the beneficiary
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Appendix P: BSA Record Retention Re
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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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