FinCEN Flips Wig Over BSA Violations
by Sam Ott, BOL Guru
We don't like to play Monday morning quarterback, but we have to admit that if we had looked at the customer transactions in this case, we would have either been thinking, "Yep, this is definitely reportable as suspicious activity," or "Gee, maybe we ought to go into the wig importing business."
On June 25, 2003, FinCEN, upon reviewing the results of follow-up FDIC examinations, announced the assessment of a $1.1 million Civil Money Penalty
against the Korea Exchange Bank. Even though the bank had adopted written policies and procedures regarding BSA reporting and recordkeeping requirements after being cited for violations during a FDIC examination -- and had even hired a law firm to conduct an investigation looking for unreported suspicious transactions and late filed SARs -- FinCEN says the bank only met the minimum standards and apparently nothing was done to ensure that the policies and procedures were properly implemented and followed.
The following types of transactions took place at a retail branch that had under $83 million in assets.
- Failure to file SARs - over a three year period, the branch failed to file 39 SARs involving $32 million;
- Large cash deposits - in a two month period, one customer (a wig importer) made 37 deposits over $10,000 totaling $1.2 million;
- Wire transfers after cash deposits - another customer made numerous $10,000+ cash deposits totally over $3.8 million over a 10 month period. Many deposits were followed immediately by over 70 international wire transfers that withdrew most, if not all, of the deposited funds;
- Structuring to avoid CTR reporting - one customer over a 15 month period, made 155 cash deposits to one account totaling $766,000. Twenty-nine transactions were between $8,000 and $10,000 and five were exactly $10,000;
- Structuring wire transfers to avoid recordkeeping requirements - a group of non-customers initiated 56 wire transfers with the amounts between $2,950 and $2,980 to the same group of beneficiaries, apparently to avoid the $3,000 recordkeeping requirement.
In each of the above described transactions, the bank staff failed to identify and investigate the apparently suspicious transactions. No SARs were filed.
In addition, the bank also failed to properly identify and retain information from non-customers who collected $3,000 or more in cash from incoming wires.
FinCEN determined that the actions of the bank were willful because it was aware of the BSA compliance regulations and had adopted minimum policies and procedures, but did not properly implement them. The $1.1 million Civil Money Penalty was the direct result.
Lessons To Be Learned
The adoption of a BSA compliance program with written policies and procedures is just the beginning. Those policies and procedures cannot merely be placed on a shelf and only dusted off before an examination.
Steps must be taken to inform and train both management and staff regarding the program requirements and consequences of non-compliance. All new employees should be trained and refresher sessions presented on an annual basis for all employees who are involved with BSA transactions.
Your procedures should be regularly tested to insure compliance. You may want to consider utilizing "mystery shoppers" to attempt to conduct apparently suspicious transactions.
When was the last time you reviewed and tested your BSA compliance program? Now would be a good time.
First published on BankersOnline.com 6/25/03
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