I have a what if scenario.....
Employee1 admits to another employee2 (who happens to have a bsa related job) that their house was raided by a certain group of fed agents and that "items" were discovered and that they are facing up to 10 years in prison, etc. Employee2 speaks with BSA officer to file a SAR report based on mildly suspicious activity in the employee1 account along with the info that employee1 told to employee2. (of course the account activity got more suspicious after employee2 told employee1 what happened) Now, the head of the bank is saying that we are taking it too far and we should not file based on what was told to us.

The BSA officer believes it is willful blindness/gross negligence to NOT file based on the information that was provided by employee2.

Help?

Well, either the activity appears suspicious or it doesn't. That will be the only determining factor. Since this is not an exact science, it will be up to the bank to make the call. If you make the wrong call, then I agree with the last statement.

Meaning it was confidential or simply that you don't believe it? Neither is relevant. You are not filing based on what you were told, you are filing based on what you found in the bank's records.

If you gather information from any outside source and it makes you concerned about a customer's activity, then some enhanced due diligence is necessary. If you investigate and find the customer's activity is "suspicious" according to the SAR filing regulation and any required dollar thresholds are met you file the SAR.

It is not necessary to substitute the word "employee" for the word "customer" to see if the procedure will change. It will not.

I wish to take a "real-world" approach:

You know your job. You know if you should file or not. You know the CEO is telling you, "You may not file this one."

You are left with two options:
1. File. Be prepared to have your resume ready in case it's needed. You must be willing to stick your neck out with this option.

2. Don't file. Put it in your "SAR's not filed" file with a note that says, "Bank CEO instructed not to file." Then when examiners review it, the CEO will have to answer for his reasons not to file. If a violation is served, then it will be on the CEO's head, not yours.

It's easy for us to sit here and say, "It was suspicious. It involves an insider. You MUST file." Real world - We are slaves to masters. The masters call the shots and we, slaves comply. We just cover ourselves and have backup proof we did all we could do.

The Handbook indicates you should document a reason for nonfiling and "per the CEO's direction" would be an accurate notation. (Keeping a personal copy of that document would be a good idea.)

Observation: Banks that use committees to make SAR decisions generally do not have to deal with vetoes from the CEO, their processes are too well documented.

I'd want the boss to put it in writing that s/he didn't want to file. I realize you'd still be sticking your neck out if you asked for it in writing, but maybe you could email to confirm the decision and they would respond with the decision.

Keep copies of everything to protect yourself.

Thank you everyone for your insight. I slept on it, and we are going to file. If the ceo doesn't agree, I will make a memo to file and place that reason in the sar not filed database. I always have my resume updated, so I'll make sure I have that ready to go. I guess it comes down to working for a company that spends more time yelling/arguing/belittling the person who is actually within the bounds of the law and doing what they are supposed to do, rather than the other employee who obviously broke the law(s).... disheartening.

I've been in the position where I've been told its not necessary to file or that management didn't think it was necessary. While I documented everything, my "other" notes indicated that I was of the opinion that I should file.

The regulator(OCC) saw this documented as such and turned around and said that regardless of management, regardless of the SAR committee my notes indicate I was of the opinion that I should have filed and that my independence had been influenced and shouldn't have been.

So, regardless of if you document it or not...if you feel you should be filing, file. You are solely responsible for doing so.

You were listening to a single examiner not the OCC; e.g. was there any direct criticism of you in the written report? Your examiner's comment is nothing but Monday morning quarterbacking from a guy who has never played the game.

As often as bankers hear people rant and rail about civil and criminal penalties in connection with BSA, it is the bank's, not the individual's responsibility to comply. The overwhelming reality is that there have been very few cases where the BSA officer or auditor became the target of regulatory enforcement actions. In those I have heard of it was absolutely appropriate. Those people willfully failed to comply with the law and lied to examiners about what was and was not done. There are no cases where BSA personnel were overruled by their superiors and then regulators or law enforcement went after the individual who could document an attempt to do the right thing.

BSA officers and auditors should have enough courage and professionalism to research their opinions, state them, and argue forcefully for them, both with their management and regulatory personnel. However, if you lose the argument, then you lose. (I've seen BSA officers and auditors lose arguments simply because they were wrong.) You document your advocacy and you go on to what's next; you are not legally obligated to become a Kamikazie.

If the disagreements happen too often you are working for the wrong people and should consider getting another job.

That's the generality. The "specific" does include a circumstance where you have no choice; i.e. when your bank's management is actively involved in the wrongdoing. I've seen some bankers deal with that situation with courage I would only hope that I would have.

I wasn't listening to a single examiner. The examiner on site discussed it with me, I argued my points and she brought it to the examiner in charge. The examiner in charge came to the same conclusion so I asked that it be escalated further and they went to the examiner in charge of compliance. From there it came down as a written recommendation in the report. They were of the opinion that my file was documented and showed that I had contemplated the filing and based on what they saw they felt I should have filed. Needless to say, we subsequently filed on that customer not because the OCC recommneded it but because other suspicious activity was identified. So they got us to abide by their recommendation regardless.

They criticized you personally in the written report?

management more so than me. but, it did indicate that MY documentation showed that I was on the fence about filing and they believe management had an influence on my decision not to. So...the issue then really became the influence of management and my independence. If that makes sense.

What gets me is that the OCC is suggesting that the BSA Officer act independently of the management structure of the Bank. The only independence I am aware of in the BSA regulations is the independence of an audit to ensure proper BSA compliance.

The exam manual adresses the following in its core procedures:
BSA Compliance Officer
14. Determine whether the board of directors has designated a person or persons responsible for the overall BSA/AML compliance program. Determine whether the BSA compliance officer has the necessary authority and resources to effectively execute all duties.
15. Assess the competency of the BSA compliance officer and his or her staff, as necessary. Determine whether the BSA compliance area is sufficiently staffed for the bank’s overall risk level (based on products, services, customers, entities, and geographic locations), size, and BSA/AML compliance needs. In addition, ensure that no conflict of interest exists and that staff is given adequate time to execute all duties.

Where does it ever say that a BSA Officer should be able to act independently?

Jenny...

You've read it and I have not, but the intimation is that they believed you might have made what they thought was the right decision, but your management induced you to make a different decision.

It may not feel like a win, but it represents the best case scenario for a banker who feels like he or she has no choice but to acquiesce to management's directions. For you, it's vindication.

Their saying the BSA Officer should be independent of management is an enormous stretch and, as Smash noted, there's no support for it. (BSA auditor, sure, but not BSA Officer.)

"Determine whether the BSA compliance officer has the necessary authority and resources to effectively execute all duties."

Doesn't this kind of imply independence of the BSA Officer?

Apparently, it does to at least one OCC exam team.

The previous version of the FDIC's BSA/AML examination procedures said the BSA Officer should be a "senior bank official" with the ability to "establish and implement policy." Now that's someone with a big stick!

I have a big stick that I sometimes beat myself over the head with ... (someone put me outta my misery)

I'm ready for a different career...

:-)

Me too! RETIREMENT!!! But that won't happen any time soon due to the economy!

Along the same storyline... the head of our bank is now not questioning everything that my dept is doing...grr. He wants to share the sar with our legal counsel, that is not an inside legal counsel. This lawyer is held on a retainer basis. I told him that he cannot show the sar to the lawyers and now he is asking for chapter and verse where it states specifically that we cannot share with an outside legal counsel. Help!?

Also, he is wanting to get an opinion on whether or not a sar has to be filed on a transaction. I tried to explain that it is an activity report, and that not everything will have a txn tied to it. He didn't like that either.

Also, when we did our research and then listed the information and back-up docs used that we had that we thought would be helpful/necessary in an investigation (ie - property address, loan docs, co-signers, referrals, etc) he said that we were doing the "cops jobs" and we should keep it short and sweet. Which is completely the opposite of what the IRS Review guy and the FinCEN just said at the Top Gun conference.

Any guidance, chapter/verse would be of great help. Thanks!

I guess I'm not understanding the reluctance to share the SAR with your outside counsel. Wouldn't the SAR be protected by attorney-client confidentiality? (As long as you didn't file the SAR on the attorney or someone in his/her office.)

I do BSA program reviews, and as part of that job, I need to review SARs that are filed to check for timeliness, accuracy of the report and sufficiency of the narrative. I was also at a Bank that had some serious BSA issues, and you had better believe the outside legal counsel reviewed the SARs that were filed.

Now the other items - opinion on when to file a SAR and keep the narrative brief are not going to help your program move forward.

I see little point in allowing outside counsel review a SAR after the fact. If you choose to use counsel prior to filing is one thing, but after the fact makes little sense to me. If you think senior management doesn't understand the SAR process now, wait until outside counsel starts telling them all types of falsehoods.

Yeah I agree... I'm not wanting to hear what the outside counsel comes up with when it comes to doing too much, etc. Thanks for the advice!

I would tell my CEO that while there is no chapter and verse for sharing SARs with outside legal counsel, many examiners, regulators, auditors, and experts in the BSA field caution against any SAR approval process that allows the BSA Officer to be outvoted. Their point is that the BSA Officer is the one who receives the most training and is most knowledgeable of AML regulations and therefore, his/her recommendation to file or not to file should reign supreme. Legal counsel's advice should be equal in value to your own SAR committee's recommendations. Concede to the CEO's recommendation if he will agree that you get to make the final decision.

I wanted to respond to each of your issues separately.

It sounds like you are playing a semantics game with your CEO. Activity = transactions in a bank. What else is there?

The SAR reporting thresholds are based on transaction activity. Even if activity doesn't meet the thresholds and you file a voluntary SAR, are you not still filing because a transaction(s) appeared suspicious?