BSA: The Cost of a Compliance Program

How much should a compliance program cost? That is a matter of opinion. But it is clear that not having a compliance program can cost a bank $10 million! That's what U.S. Trust Corporation is going to pay in civil money penalties.

It can be difficult to explain what a compliance program is. It is particularly difficult because a good compliance program has lines running all over the organization chart with responsibilities and accountabilities located in a variety of places. However, when management asks how important it is to have a compliance program, there are two new cases to point to. These simply fortify the emphasis placed on compliance in the Foxdale case which involved fair lending.

In July 2001, the Federal Reserve took two actions to enforce compliance with the Bank Secrecy Act. U.S. Trust Corp. and the Bank of Rogers in Rogers, Arkansas are the new pair of poster children in compliance enforcement. Both banks are operating under an order to establish a compliance program that satisfies their regulators.

The real deficiencies in both cases were inadequate compliance programs. It came down to lacking adequate resources for compliance and compliance tools. U.S. Trust Corp. is required to implement an aggregation program to identify cash transactions. Both banks are required to establish compliance programs with clear responsibilities and accountabilities. Because both cases involve the Bank Secrecy Act, both banks are required to establish "Due Diligence" programs, the new term for KYC.
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Copyright © 2001 Compliance Action. Originally appeared in Compliance Action, Vol. 6, No. 7, 7/01