The Ever Important Policies and Procedures

In 1995, more than 70,000 criminal referrals were filed.

Regulators constantly emphasize the importance of policies and procedures. No aspect of banking seems to be immune from these requirements. The magic "P" words are a mainstay of compliance programs.

In his recent statement to the House Committee on Banking and Financial Services, Governor Edward Kelly, Jr. stated that a "banking organization's best protection against illicit activities is its own policies and procedures designed to identify and then reject potentially illegal or damaging transactions." This is the reason behind the regulatory agencies' emphasis on internal controls and procedures for detecting suspicious transactions.

Developments in the Bank Secrecy regulations and enforcement of white collar crime have been extensive. In the face of all this newness, it is the old reliables, policies and procedures, that need revising and renewed attention.

Policies are the bank's chief method of communicating to bank staff. Policies set priorities and help to establish the corporate culture. Policies guide staff in setting priorities by communicating the bank's business philosophy. The procedures tell staff how to do something. Ideally, procedures should also make clear who is responsible for specific tasks.

While the compliance world directs its attention to Suspicious Activity Reports, Currency Transaction Reports, and the procedures to follow, it is worth noting that Governor Kelly also sees a powerful safety and soundness connection. "Safety and soundness considerations dictate that banking organizations have adequate policies and procedures in this area, including procedures to ensure compliance with the rules and regulations designed to assist in the detection of criminal activity, decrease illegal activity through increased awareness by employees, protect the reputation of a banking organization, and promote good, as opposed to unsavory, customer relationships."

Significant compliance developments in the area of crime identification and prevention are now being put into place. After all the effort that went into improving the CTR and SAR forms and reporting systems, the agencies will place a high priority on making the new process work. Your bank's response to these changes and new requirements will be scrutinized during your next examination. In making his statement, Governor Kelly outlined the key elements of a compliance program. Each of his points translates into a component of your program and action steps you should take.

ACTION STEPS

Review and update your compliance policies and procedures to ensure compliance with new rules and regulations designed to assist in the detection of criminal activity.
Train employees on proper use of new CTR and Suspicious Activity forms.
Train employees on Know Your Customer principles and procedures to promote good, as opposed to unsavory, customer relationships.