Lessons in Enforcement Actions: BSA

Enforcement actions serve several purposes. One is to correct the violations. Another is to provide guidance for other institutions subject to the same regulations. Enforcement cases thus provide a good measurement tool for your compliance programs. Except for remedial requirements, such as civil money penalties or back filing, most elements of a consent order simply require what should have been in place to prevent the violations.

For example, look at the FRB's enforcement order against Standard Chartered Bank. The action involved anti-money laundering problems. Both the Federal Reserve and the State of New York had concerns that Standard Chartered, as an international bank, was not maintaining a strong BSA program. One of the corrective measures, in addition to development of improved controls and recordkeeping, requires the bank to develop controls to ensure compliance with all requirements relating to correspondent accounts for non-U.S. persons and shell banks.

A second significant requirement is that the bank develop a methodology for assigning risk levels to the customer base, including correspondent account holders. Risks, controls, training and documentation sums up the required elements in this case.

The FRB of San Francisco's written agreement with County Bank, Merced, CA reveals a similar emphasis on controls to ensure compliance. County Bank must develop written procedures and improve internal controls for BSA compliance. The bank must also conduct a risk focused assessment of the customer base that is designed to distinguish between transactions that are usual and those that indicate risk.

Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 14, 12/04