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Bank Secrecy Act Violations And The Mid-level Banker
by Thomas W. Martin
Not too long ago two private bankers were sentenced to prison for involvement in a money laundering scheme. Moreover, their bank suffered a multi-million dollar fine.
An assistant branch manager at another bank has been implicated in an international money laundering operation estimated over $100 million.
These examples point to a potentially costly and damaging oversight in banking…an ineffective effort to build awareness of the Bank Secrecy Act and money laundering among the mid-level tier of bankers. Commercial lenders, private bankers, community bankers and others at this level may have neither the time nor the inclination to obtain the knowledge and understanding needed to comply with this regulation.
Good Sales Techniques
Paced by the intensely competitive nature of today's banking environment, the emergence of a sales culture and the increasing demands on a banker's time, what is the essential information needed to help this group? While they are trained in the latest sales techniques for relationship building, these bankers are most vulnerable to unwittingly assisting money laundering among what could appear to be the bank's most coveted and respected customers.
Perhaps the traditional focus of Bank Secrecy Act training should be modified.
"Cut to the chase"
Instead of beginning with the usual history of the Act, then weaving in the necessary requisites of dissecting the Currency Transaction Form and the litany of administrative rulings, perhaps an approach focusing on the "do not's" rather than the "do's" would be more effective.
This should be the heart of the training session for the middle-tier of bankers. They may not be interested in attentively listening to the theory or substance of the Bank Secrecy Act.
Recognizing this, why not train them on what they need to avoid so they and the bank are in compliance?
Cut to the chase!
Five key pitfalls
To this end, here are 5 key pitfalls around which to build Bank Secrecy Act awareness training for middle and upper management:
- Avoid assisting in the structuring of a currency transaction. A customer who has a reportable transaction, but decides to change the amount in order to fall below the reporting threshold has structured the transaction.
This is a violation of Federal law.
A banker who advises or assists a customer in structuring very well could face civil and criminal penalties, especially if it so happens this customer is implicated in a money laundering ring.
- Avoid inappropriate exemptions. Many banks exempt certain organizations from filing currency transactions. The exemptions follow guidelines outlined in the IRS publication,"Currency and Foreign Transactions Exemption Handbook."
However, no individual can be exempted from the filing of a currency transaction report. For example, a branch manager may cave in to the demands of a high-balance customer who threatens to close accounts if a report is filed.
"On-the-fly" exemptions given to exempted customers who exceed their reportable threshold are also inappropriate and a violation of the Act. Driven by balance quotas, bankers seem to be most vulnerable to this pitfall.
- Avoid ignoring patterns of suspicious activity. A customer who cashes several checks totaling over $10,000 at various branches in the same vicinity within a certain time frame on the same day warrants suspicion. However, the fear of having to close the account and lose the balance is no excuse for ignoring the behavior. Under the Annunzio-Wylie Act, once a banker has knowledge of a potential illegal activity, a suspicious report must be filed. As an aside, bankers should know there are no financial privacy liability issues here.
- Avoid assisting a customer in avoiding the filing of required currency transaction reports. The customer who asks how to avoid having currency transaction reports filed should be considered suspicious. For example, a private banker, unwittingly assisting the customer by discussing reporting thresholds or instructing a teller not to file a currency transaction report, could be implicated for involvement in money laundering.
- Avoid inattentiveness to customer activity. The commercial lender who neglects to look for patterns of unusual transaction behavior or ignores inconsistencies in customer activity could unknowingly facilitate a major laundering scheme. All middle-tier bankers must be aware of their bank's "Know Your Customer" policy and be vigilant in their monitoring of customer transactions.
There are many sources of Bank Secrecy Act training ranging from video presentations to retaining BSA consultants. However, a bank can craft its own simple, effective and to-the-point awareness training program for the mid-level banker by focusing on these pitfalls. Sprinkling examples into the presentation can add relevance and interest.
This format can answer the "why should I care?" attitude that can typify mid-level bankers who may be more inclined to build customer balances than to build compliance to the law.
Thomas W. Martin is a Vice President for SunTrust Bank in Atlanta where he is the Bank Secrecy Act officer. He also conducts seminars on the Bank Secrecy Act for the Georgia American Institute of Banking.
Electronic Cash
It seems one of the first steps towards that "cashless society" we've been hearing about for years is finally here. Slowly, but surely, the concept of electronic cash is taking hold.
Using a card with a tiny "smart" chip, a customer can go to an ATM, or even a specially equipped telephone, and "load" the card with "cash" right from his account.
Then he can use the card in the subway, for telephone calls, in stores and supermarkets that are equipped to handle them, even (already!) at some McDonald's restaurants for lunch. The balance still on the card is reduced by the amount of the sale with each use. When it gets to zero, he simply loads it up again.
We hope parking meters will be equipped to handle them!
Copyright © 1995 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 6, No. 2, 11/95
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