Wednesday, February 25, 2009
( 8:50 PM ) John Burnett
Top Gun 2009 -- Day 2
Before reporting on Wednesday's sessions, I wanted to add a note about yesterday's presentation on OFAC, delivered remotely by Jerry LiVigni. You'll recall that Jerry advocated a reasonable approach to OFAC compliance, with reason based in a careful OFAC risk analysis.
Perhaps the most memorable evidence of Jerry's advocacy of reasonableness was his response to a question about the "25 year old teller" who is confronted with a definite OFAC match in the form of an individual at her window, who makes known his desire to complete a transaction notwithstanding his notoriety as a member of the SDN list (listed not once, but ten different times, to include all of his aliases). Jerry made it clear that OFAC does not want the teller, or any one else, to put herself in harm's way by insisting on strict compliance with the OFAC blocking requirements. It was refreshing to hear someone from OFAC offer that common-sense type of reply to an important question.
On to today's sessions:
Wednesday morning featured two sets of three breakout sessions. The first group included Ken Golliher's session on the new BSA CTR exemption rules (the ones that became effective 1/5/2009). Even this session was not without some controversy, as Tom Fleming (from FinCEN) introduced some doubt as he suggested that a bank can form a reasonable belief that a relatively new customer will meet the new five/year large currency transaction count and, if it is otherwise qualified, grant an exemption to that customer. There is still some question on that point, and Ken is working to get a clarification.
In another of the first breakouts, Kathleen Blanchard, Randy Carey and David Dickinson held forth on "Writing or Evaluating Independent Reports of Examination." And in the third of the early breakouts, Mary Beth Guard and I offered our take on the "BSA/AML Implications of Remote Deposit Capture." In that session, we found bankers who were already fully immersed in RDC activity, who were glad to share the lessons they had already gleaned from their experience. Mary Beth and I agreed that we had learned as much from conducting the session as we had hoped to impart. Some of the fraud examples we heard from participants were truly eye-opening!
The second group of breakout sessions included presentations on "Prepaid Cards" conducted by Brenda Canterbury and Mary Beth; "Transaction Testing: When and How Much," presented by Kathleen, Randy and David; and "Banking MSBs," presented by Michelle Hemerley (with intermittent assistance from yours truly).
Michelle's bank has more than 500 upper tier MSB customers (those for whom MSB activity is their primary business), and it doesn't use sophisticated BSA/AML transaction monitoring systems. She said that her bank goes well beyond requirements and works with their MSB customers to help the MSBs stay in business and comply with BSA/AML regulations, while at the same time protecting the bank from BSA/AML risk in banking the MSBs.
After lunch, BSA veteran expert attorney Peter Djinis offered suggestions on "When Things Go South: Salvaging or Responding to an On-Site Examination Gone Wrong." Peter likened working with BSA/AML examinations to painting the Golden Gate Bridge. As soon as you finish working from one end of the bridge to the other, it's time for you to go back and start again. As soon as one exam is completed and its fallout cleaned up, preparation begins for the next exam.
The afternoon's second session found Peter back on the dais, joined by Ken, Michelle and Brenda, to discuss "Conducting an AML Investigation." Michelle and Brenda in particular shared real-world suggestions based on their current banking experience. Michelle offered two "secret tips": Watch out for customer-owned and -operated ATMs, which present money laundering opportunities; and monitor cashier's checks that are older than one year (that may be sitting in safe deposit boxes to hide assets from tax authorities). An overriding theme in the presentation was a suggestion to form a big picture of a target customer's activities in an investigation, including any activity in other business group silos, such as trust, investments, or insurance. Michelle recommended using a simple checklist for each investigation to ensure that all areas are reviewed.
The afternoon was capped off by IRS Special Agent Maurice Clark's presentation on "IRS CID and SAR Review Teams." These are regional teams that review SARs filed by reporters in their regions, who use the SARs in their investigations (or to start investigations) into wrongdoing. While part of Clark's presentation touted the IRS's lead role in addressing filed SARs, the true message of the session was the importance of SAR filings in the effort to investigate and prosecute alleged criminal activity, including money laundering and terrorist financing. Agent Clark got the attention of FinCEN's Tom Fleming when he recommended eliminating transaction detail from SAR narratives (including instead a statement that the detail is available in the documentation for the SAR). The IRS, said Clark, doesn't have time to wade through the details in an extended essay, and would prefer simpler narratives. Tom reminded the audience that the SAR instructions call for that detail and the detail has provided the fodder for much of the analytical work that FinCEN does with SARs. David Dickinson sagely suggested that the narrative include a summary of the key information in the first sentence or two, with detail following, so that the gist of the narrative can be readily seen by SAR review teams, and details are there too for those who want to read them.
Agent Clark wrapped his presentation with a series of actual cases (scrubbed for anonymity) that stemmed from SAR filings. From the dentist's wife who laundered funds skimmed from her husband's practice to a serial murderer running through funds from life insurance proceeds from his three deceased wives, the cases painted vivid examples of how SAR filings can help put criminals in jail and separate them from some of their ill-gotten gains.
After the day's sessions, BOL management hosted the conference speakers for dinner. Between sessions of Michele and Mary Beth showing off the merits of their Amazon Kindle readers (truly and amazing tech-tool/toy for the right people), the beginnings of a post-conference evaluation were already in the air, along with hints of planning for future BSA/AML conferences. That review and planning will continue in the coming weeks as the evaluations supplied by attendees are digested.
But in the meantime, there is still Thursday morning, with three more valuable sessions to be offered. I'll work on my blog of those sessions on the plane Thursday evening as I wend my weary way back home to Cape Cod. Watch for it Friday morning. #
Tuesday, February 24, 2009
( 7:33 PM ) John Burnett
3rd Annual BSA/AML Top Gun Conference
Bally's, Las Vegas
Day 1 -- Tuesday, February 24
I'm in Las Vegas for much of this week, participating in BOL Conferences' BSA/AML Top Gun conference. This is the third annual event, and it shows early signs of being the best of the series.
Mary Beth Guard and Ken Golliher welcomed to the conference over 150 attendees from all over the country (and two from outside the US).
FinCEN's Thomas Fleming started his presentation by suggesting that there needs to be a balance between reactions to the current economic crisis and BSA/AML compliance. With limited -- often shrinking -- resources, bankers have to decide where they must focus, and what they can let go. From the government's perspective, BSA/AML/OFAC compliance continues to be a national security concern. That suggests, he said, that bankers should fine-tune their approach to compliance by focusing on higher risk activities, customers and products, remembering that customer behavior will change in troubled economic times, particularly with regard to the safety of their dwindling funds.
Tom next recapped the events leading up to the recent revision to the CTR exemption process, and followed with a list of current and pending FinCEN initiatives affecting the industry. The first of those was today's FinCEN release of a new customer education brochure regarding CTR filings and structuring (the agency's email alert of the release hit my BlackBerry at 7:56 a.m. PST).
Other releases on the horizon include --
Technology was stretched a bit as Mary Beth and her iPhone became the go-betweens for OFAC's Jerry LiVigni, who had to "call in" his presentation from his office. Jerry's message advocated a reasonable approach to OFAC compliance, based on a bank's risk analysis.
ID Theft and CIP Implications
Pat Cashman, Ken Golliher and I compressed our impressions on this topic into a 30-minute slot just before lunch. We illustrated the connections between compliance with ID theft "Red Flags" regulations and CIP rules, and then listed some of the pros and cons of merging Red Flags and CIP policies and procedures.
CSI -- Common Slip-up Investigations
The presentation slot right after lunch is always a challenge. Pat Cashman and Dave Dickinson were up to the task, though, with their entertaining look at common screw-ups (if it's good enough for the president, it's good enough for me) that can get banks into trouble at audit or exam time.
Mortgage Loan Fraud
Mary Beth gave us all a quick overview of the huge problem of mortgage loan fraud that has been a major contributor to the global economic recession and continues to threaten banks and other mortgage investors. She punctuated her remarks with examples of the many varieties of mortgage fraud that have been involved, and encouraged bankers to develop methods and procedures designed to identify and prevent fraud in the loan application process.
David and Ken teamed up to discuss tips for preparing for regulatory exams. Strategies and tactics to make the exam process smoother and more efficient were high on their list. They ran from making sure that issues identified in prior exams and audits are addressed, to ensuring that staff members are prepared for the exam, to preparing and delivering pre-exam information, to a follow-up "party" to thank staff members for exam successes.
The day wrapped up with a Q&A session and reception.
I'll be back with an update covering Day 2 of the 2009 Top Gun Conference.