BSA Problems Hot Topic in DC: Requests for Comments Getting Unprecedented Results

The regulatory agencies, government agencies and banking associations in Washington are all currently very actively involved with the Bank Secrecy Act/Patriot Act/Anti-Money Laundering compliance issues. Recent developments regarding penalties and criticisms have caused the financial industry to become much more willing to articulate their problems with the laws and regulations.

OTS: Takes Two Hours to Comply
Some of the recent unrest was caused by the Office of Thrift Supervision's recent estimate for a Paperwork Reduction Act "information collection requirement" for savings associations implementing a program reasonably designed to assure and monitor compliance with currency recordkeeping and reporting. OTS claimed that such a regulatory burden, other than the filing of CTRs, SARs and CIP recordkeeping, requires approximately two hours annually to meet the requirements of the regulations. The resulting comments flew like troubles from Pandora's Box.

Records Show Otherwise
According to a letter made public from ABA to OTS in response to comments on their estimate, Director of the Center for Regulatory Compliance for ABA and BANKERS' HOTLINE advisor John Byrne wrote, "...the cornerstone of establishing and maintaining a comprehensive BSA compliance program ... is a substantial undertaking that post 9-11 entails extensive work throughout the year to keep controls current, responsible staff positions filled, audits and testing performed and training planned and executed."

He went on to say "...the creation, maintenance and regular verification of the fundamental BSA compliance program entails obligations amounting to information collection ... that substantially exceed 2 hours a year."

Mr. Byrne pointed out the developments in the past three years of the USA PATRIOT Act which requires the financial institution to incorporate their CIP into an overall BSA program, which must include (1) internal policies, procedures and controls to ensure ongoing compliance; (2) designation of a BSA compliance officer; (3) an ongoing employee training program; and (4) an independent audit process to test programs.

He went on to list, in detail, the estimated time expended in meeting each of the requirements. Included in the burden for maintaining or verifying a BSA program were time spent on revising the institution's BSA compliance program in order to address regulatory changes; time spent to conduct risk assessments; time spent on conducting independent testing or auditing; time spent on board consideration and approval, and time spent on keeping training curriculum current. The estimate of thrifts of under $250 million as reported by ABA members was that they have spent 40 hours or more keeping their program current and approved by the board each year. John included the information supplied by one community thrift with assets under $250 million that expended a total of 60 hours in the aggregate exclusively on its efforts to revise its BSA program just to be consistent with the steps expected by OTS guidance and their program of ADAPT (analyze, develop, apply and test.)

Examiners Goal - to be 'Fair' and 'Consistent'
In other developments, Treasury Secretary John Snow, in a meeting with bankers in February, stressed the fact that the information bankers report under the Bank Secrecy Act is "...critical to national security." He said Treasury is working with FinCEN, bank regulators and the Department of Justice to ensure that BSA examination and enforcement is "...fair, consistent and achieving the ultimate policy goals of the statute." Juan Zarate, assistant Treasury secretary for terrorist financing and financial crimes said at the same meeting, that "...the private sector is seen and expected to be on the front lines...to protect us and the financial system against the taint of terrorist financing and money laundering. While BSA must be enforced aggressively, it must also be done fairly and judiciously." He said recent enforcement actions were due to "basic failures to apply the basic standards of anti-money laundering systems."

Falling Short of the Goal
Other reports say otherwise. In the BANKERS' HOTLINE office, we've learned of financial institutions that have been criticized for not having outside, in-person training for BSA. There was a report of an examiner who insisted a SAR had to be filed for the sale of a check for $5,000 in cash. Another call asked us to check on whether a BSA officer had to attend a national conference for training each year, as he had been advised by his examiner was part of the requirement. And many subscribers have called about problems with MSBs, with some closing accounts rather than risk not being in compliance. Financial institutions are also hesitant about using the exemption process, especially now that some have been criticized for not remembering to file the biennial renewal forms on time. And the problem of meeting a "quota" of SAR filing persists in spite of the efforts of FinCEN Director William Fox to combat that problem.

They Want Your Comments!
FinCEN has also asked for comments under the Paperwork Reduction Act. ABA's John Byrne set the tone for this in his February 18th letter to FinCEN where he writes, "We believe that maintaining the CTR threshold at this current level generates too many reports that capture extensive immaterial activity wasting banker and law enforcement time that could be spent on SAR issues. Accordingly, ABA strongly advocates that raising the CTR threshold to an amount such as $20,000 or $25,000 across the board will have the most significant practical utility in reducing undue paperwork burden.

BANKERS' HOTLINE will keep subscribers up-to-date on BSA developments as they are reported.

The federal banking and thrift regulatory agencies are asking for burden reducing recommendations on regulations concerning Money Laundering and Safety and Soundness. The request is part of the agencies' effort to identify and eliminate regulatory requirements that are outdated, unnecessary or unduly burdensome pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) Comments are due by May 4, 2005, and may be submitted directly to the agencies on the EGRPRA Web site at www.EGRPRA.gov We strongly encourage our subscribers to write.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 1, 2/05