BSA?Still A Hot Issue

Use Of Criminal Referral Form Underlined At BSA Session
The required use of the Criminal Referral Form (CRF) was emphasized at an important session at the American Bankers Association/American Bar Association Money Laundering Enforcement Seminar in Washington, DC on October 18.

John Byrne, Senior Legislative Counsel of the American Bankers Association moderated the program. The participants were Lynne Federman, VP and Senior Counsel of Chase Manhattan Bank, New York; Ralph Sharpe, Director, Enforcement & Compliance Division of the OCC; and Richard Small, Special Counsel, Division of Banking Supervision, Federal Reserve System.

Rick Small gave an update on the new Criminal Referral Form (see article on page 2) and told the 250 attendees that the October 8, 1993 effective date for the implementation of the requirements for filing still stood, but that until the new criminal referral forms are distributed, filing should be done on the old, available forms.

CRF Not Being Used As Required
The need to file for violations other than those involving money laundering or the Bank Secrecy Act was emphasized by Ralph Sharpe. He pointed out that it appears the reporting of crimes and suspected crimes has not been fully complied with as required by financial institutions. For instance, it is required to file a CRF for any internal defalcation, check fraud, loan fraud, kiting, forgery and other illegal activities.

He reminded the group that reports are required, using a standardized form if any of four conditions are met. (See list on this page.)

Not Necessary To Take A Loss
Mr. Sharpe said there are many times when a financial institution takes a loss, or investigates a potential loss and makes a recovery, and does not report the incident.

"Examiners are being trained to look for this omission, and will be checking more closely," he said. He also cautioned the bankers that there does not have to be a loss to file a report.

He said, "The CRF very clearly states, 'suspects one?of having committed or aided in the commission', and 'before reimbursement or recovery' and 'suspects that it is being used', indicating that no loss is necessary to trigger the filing of a form."

Safe Harbor-But Must Not Tell
Rick Small referred to the fact that the Annunzio Wylie Act protects the financial institution from civil suit from the individual named in the CRF, as there is a "safe harbor" clause, blocking this type of action.

But he cautioned the bankers that all "need-to-know" employees should be made aware that the individual must not be told that the CRF has been filed. This "safe harbor/non-disclosure" is a very important part of the Annunzio Wylie Anti-Money Laundering Act.

Lynne Federman presented an example of the CRF filing process. In brief, it tracks the law and regulations to policy manuals and procedures created by compliance, risk management, and internal auditors. If the financial institution has in-house counsel, they also have input. The next step is BSA training.

Manually, the process then passes the regulation and procedures through training to the teller and other front line personnel who may have the ability to spot and report money laundering and/or other violations. Their report would go to the supervisor or manager, who then forwards it to the compliance/reporting officer, who reviews the nformation and, if appropriate, prepares and files the CRF.

On the computer system side, after being made aware of the regulation and procedures, software captures cash transactions, and generates reports reviewed by the compliance/reporting officer-again leading to filing if the situation warrants it.

After the CRF is filed, it remains for the compliance/reporting officer to review and decide whether or not to close the account involved. The last responsibility of this officer is to report to the board of directors as required by the regulator. Included with her material was a sample cover letter and a format for reporting to the board.

Lynne has given us permission to offer her model filing process described above and her sample cover letter to notify the board of directors of criminal referral forms filed. Call us with your fax number if you'd like a copy of these pages.

Copyright © 1993 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 4, No. 5, 11/93