BSA: What Your Peers Do and Say

by Mary Beth Guard, Executive Editor

In late February 2007, BankersOnline hosted a conference devoted to Bank Secrecy Act issues and discussion. One highlight of the conference was an interactive audience response session that allowed attendees (180 bankers representing banks, thrifts, and credit unions in 46 states ranging in asset size from under $25 million to over $30 billion) to provide feedback about what they do in their institutions on various issues and what their experience has been.

These excerpts from the results of the interactive sessions provide insight into how financial institutions are grappling with BSA-related challenges.

What the Numbers Show
Performing BSA/AML Risk Assessment 67% perform it on an annual basis. 32% said they perform it "regularly." P314(b) Only 40% of the institutions represented had registered to share information about possible money laundering or terrorist activity with other financial institutions. Why would you NOT register and avail yourself of the safe harbor from liability? OFAC issues Only 11% of the institutions present had EVER had a true OFAC hit (as opposed to a false positive). Of the institutions with asset sizes under $250 million, none reported having a true hit.

The number of institutions abandoning the manual method of checking for OFAC has soared. A whopping 88% now use OFAC software of some kind. 39% perform a system-wide OFAC scrub every time the OFAC list is updated, while 17% do it every night.

Are you checking the OFAC list for the name of a noncustomer payee who is cashing an on-us check at your teller window? 71% of those surveyed say they aren't! Not a single institution over $3 Billion checks noncustomer payee names. ID Verification Do you accept the matricula consular card as an acceptable form of ID for account opening? 51% said no. 29% accept it as primary ID! Of those who do NOT accept it, 98% said it was due to questions/concerns about the adequacy of the process under which it is issued. Monetary instruments and wires Do you accept wires for/from noncustomers? 77% say no. Do you sell monetary instruments to noncustomers? 55% say no. Evaluating employees A growing trend is to include BSA compliance in employee evaluations, but only 20% of those surveyed current do so. 5% use a 3 strikes rule for employee violations of the institution's BSA/AML policy/procedures. High risk customers 94% of those surveyed say they have developed a list of their high risk customers. Over 50% said they have a detailed activity profile on every customer whom they have identified as high risk.

SAR Stats
Reporting to board When reporting SAR activity to the board of directors, 63% report only SAR filing summaries. SAR Filing In 39% of the institutions, the BSA officer decides when to file a SAR. In 24% it's a committee. Nonfiling 51% have a formal sign-off process on non-SAR filings where someone of authority reviews the decision to not file before the decision is finalized Profiling 63% ask profiling questions at the time of account opening. e-filing 46% are using e-filing. Suspicious Activity red flags 81% teach suspicious activity red flags specific to job duties in their training. More about training 75% had conducted formal AML training to the entire staff that included a discussion of the three components - placement, layering and integration.

83% provided formal BSA/AML training to the board and Senior Management.

A stunning 95% do not use test scores on AML training and other metrics for risk assessment and for risk ranking employees, business units and lines of business. Repeated apparent structuring When there is repeated structuring, but the source of funds appears legitimate, 52% said they just continue filing SARs and don't take other action. 21% educate the customer. 27% eventually close the account. Of those that close an account for SAR-related reasons, 64% do it via correspondence from the branch or an officer. Repeated SARs Problem customer? Repeated SARs? 34% keep them until the customer closes the account. 37% keep them until they convince management to let them run the customer off.

Funny Numbers
MSBs When asked "How does your institution bank MSBs?":

33% said "We don't."
39% said "We do, as specified by law.
14% said "We only bank certain types of MSBs we consider low risk."
14% said "We do bank them, but with special conditions, such as fees." Sole proprietorships 46% of the respondents allow sole proprietors to run business-related transactions through personal accounts CIP and authorized signers/guarantors The CIP rules do not require an institution to CIP authorized signers and guarantors. That is left up to each institution's individual CIP. An astonishing 65% of those surveyed say they DO CIP authorized signers and guarantors.

When asked what they require from them, they say "All components - same information they require from account owners."

Other interesting tidbits

David Dickinson refers to the BSA/AML Examination Manual as the "Shut-Up Manual" because it can end arguments and make an examiner "shut up" when you point out what he/she is saying something contrary to what the manual says.
Ken Golliher says the only right answer to give to the pre-exam question asking for a list of all accounts you opened without first obtaining the pieces of identifying information you're supposed to collect is "None."
Rather than depending upon the paper version of the BSA/AML manual, try using the PDF version. If you use it with the full ($300 version) of Adobe Acrobat (rather than just the reader) or you use it with ScanSoft PDF Converter, you can highlight, create bookmarks, add your own comments, and do a host of other things to make it much more user-friendly.
I mentioned the use of movie clips and TV clips in connection with your BSA training efforts. For example, Lethal Weapon 2 has a great scene with Joe Pesci (portraying an accountant for the mob who had skimmed money) explaining how money laundering works. There's a great list on a thread I started in the BOL Watercooler.
Sai Huda reports that 18% of the 2006 enforcement actions issued by FDIC related to BSA; 46% of the OTS enforcement orders were BSA-related; 37% of FRB's enforcement actions were BSA; 24% OCC; an average of 30% of ALL enforcement orders from all regulators combined were BSA.
There's a growing trend for examiners to cite as violations failure to comply with directives within the BSA/AML manual - rather than just direct violations of an actual law or reg.
BOL has a new tool that puts all the BSA/AML penalty/enforcement order information at your fingertips. http://www.bankersonline.com/security/bsapenaltylist.html
We also maintain our SAR Research Guide. http://www.bankersonline.com/security/sarreviewcompil.html

First published on BankersOnline.com 1/30/08