BSA: Deutsche Bank Under BSA Order

Yet another bank has fallen under a BSA examination. The Federal Reserve System recently announced a written agreement with Deutshe Bank Trust Company Americas. The agreement requires Deutsche Bank to implement a BSA compliance program to bring the bank into compliance.

The first step is a management review of the bank's staffing and officer responsibilities designed to enhance the compliance program in the correspondent banking and funds transfer clearing business lines. Management must look at controls, corporate governance, organizational structure, and accountability. Two important aspects here are the emphasis on corporate governance and accountability. The Federal Reserve will clearly be watching the decisions by management and the board.

The bank must also make significant changes to its compliance program to cover correspondent banking and funds transfer clearing activities. The program must deal with internal controls for this area of the bank, including recordkeeping and reporting. The program must also ensure compliance with customers or transactions involving shell banks and certain correspondent accounts. The program must be risk-based and include documentation of due diligence performed.

Like most BSA written agreements, this one includes a requirement for independent testing. The testing program must evaluate all elements of the compliance program including due diligence, compliance with policies and procedures, ongoing monitoring, training, and appropriate responses to any findings.

The written agreement includes special attention for two very hot topics: suspicious activity reporting and customer due diligence. The risk analysis must include assigning risk to all of the bank's customer base, including correspondent account holders. The program should identify categories of customers whose transactions are routine and then determine the appropriate level of enhanced due diligence for higher risk customers.

The bank must obtain information about the respondent including its markets, customer base, AML procedures and business operations. The procedures and information should enable Deutsche Bank to identify and report suspicious activity.

Finally, the agreement requires the bank to implement and report on a transaction monitoring system. Implementation includes testing the system to determine its effectiveness. All in all, the agreement is an outline of a required BSA program. The agreement does illustrate what the regulatory agencies expect in customer risk analysis and due diligence.

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 12, 10/05