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Interagency BSA (Bank Secrecy Act) Guidance1
by Kristine Regele, CAMS, Sr. Compliance Analyst - ChoicePoint
Question: How does a regulator decide whether a BSA compliance program warrants a cease and desist order?
Answer: An interagency statement was issued to guide regulatory enforcement decisions. As we know, it has been challenging to decipher information. However, there is good news. Bankers have questioned the criteria used by regulators when deciding whether an examiner's concerns about a bank's BSA compliance program warrant a cease and desist order, or whether they can be addressed through less severe actions, such as an informal conversation with the Board or Directors, or a written finding of weakness. There appears to have been a degree of inconsistency in decisions made and enforcement actions taken by the federal financial regulatory agencies. In response to this, and to "offer insight into the considerations that form the basis of [BSA compliance related] decisions1," the agencies issued an Interagency Statement on Enforcement of Bank Secrecy Act/Anti-Money Laundering Requirements. The interagency Statement discusses current approaches to BSA enforcement used by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision, and the National Credit Union Administration.
The Statement clarifies the situations when formal cease and desist orders are to be issued according to statutory requirements. It also clarifies the concept of repeated BSA violations by saying, "An Agency will ordinarily not issue a cease and desist order … for failure to correct a BSA Compliance Program problem unless the deficiencies subsequently found by the Agency are substantially the same as those previously reported to the institution.2"
A Solid KYC Program Can Help
Regulators may also issue a cease and desist order if a bank's compliance program appears to be ineffective when the situation is reviewed as a whole. Thus, a BSA examination by the regulators still calls for an evaluative component as to whether the bank's compliance program is effective. For example, the BSA requires banks to have "a Customer Identification Program with risk-based procedures that enable the institution to form a reasonable belief that it knows the true identities of its customers." While the interagency Statement clarifies some BSA enforcement actions and expectations, it does not define the concept of "reasonable belief." At this time, a solid KYC program with risk-based enhanced due diligence measures is still likely to be a prudent course of action.
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About ChoicePoint
ChoicePoint (NYSE: CPS) provides businesses, government agencies and non-profit organizations with technology, software, information and marketing services to help manage economic and physical risks as well as identify business opportunities. Each year, we help more than 100 million people who are seeking to obtain jobs, fairly priced home and auto insurance, and who wish to rent apartments. Our authentication and anti-fraud tools improve efficiency and instill confidence in the decision-making process for our customers and consumers. Consumers have free access to the reports we create at www.ChoiceTrust.com. Learn what we do to protect consumer privacy by visiting www.PrivacyatChoicePoint.com and, for more information on our company, go to www.ChoicePoint.com.
1 The Board of Governors of the Federal Reserve System, et al., Joint Press Release, July 19, 2007, http://www.federalreserve.gov/boarddocs/press/bcreg/2007/20070719/default.htm, (July 25, 2007).
2 The Board of Governors of the Federal Reserve System, et al., Interagency Statement on Enforcement of Bank Secrecy Act/Anti-Money Laundering Requirements, July 19, 2007, http://www.federalreserve.gov/boarddocs/press/bcreg/2007/20070719/attachment.pdf, (July 25, 2007).
First published on BankersOnline.com 10/08/07
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