BSA/AML Exam Procedures Released: Time for Review and Implementation

by John Byrne, Esq.
As promised, the Federal Financial Institutions Examination Council (FFIEC) issued the Bank Secrecy Act /Anti-Money Laundering (BSA/AML) Examination Manual (Manual) on June 30.

The Manual can be found at: http://www.ffiec.gov/press/pr063005.htm or on any of the federal banking agency websites.

The FFIEC BSA/AML Examination Manual was developed by the federal banking agencies; Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and Office of Thrift Supervision (OTS) in collaboration with the Financial Crimes Enforcement Network (FinCEN). The announcement also pointed out that the Conference of State Bank Supervisors played a consultative role and the Office of Foreign Assets Control (OFAC) "collaborated on the development of core overview and examination procedures addressing compliance with regulations enforced by OFAC."

As you know, the development of this manual is the result of a joint and unprecedented effort by the federal banking agencies and the Financial Crimes Enforcement Network (FinCEN) and is designed to ensure consistency in BSA/AML examinations. The examination procedures will be used by the federal banking examiners during the third quarter of 2005. The manual consists of the following sections:

Introduction
Core: Overview and Procedures
Expanded: Overview and Procedures
Appendices

According to the introduction, the core and expanded overview sections provide narrative guidance and background information on each topic; the procedures provide examiner guidance. The core also serves "as a platform for the BSA/AML examination and, for the most part, address legal and regulatory requirements of the BSA/AML compliance program." The scoping and planning section is designed to assist the examiner in developing "an appropriate examination plan." The manual notes that there may be "instances where a topic is covered in both the core and expanded sections (e.g., funds transfers and foreign correspondent banking)."

According to the transmittal letter sent to all banking organization CEO's:

The Manual does not set new standards; instead, it is a compilation of existing regulatory requirements, supervisory expectations, and sound practices in the BSA/AML area. In fact, while the document is approximately 300 pages in length, more than two-thirds of it is dedicated to providing narrative guidance and resource materials. Compliance and business line personnel should review this Manual carefully to ensure that your banking organization is properly addressing BSA/AML compliance and risk management issues.

The letter also contains Q and A's including:
Q: Does the new manual impose additional requirements for regulatory compliance or AML risk management?
A: The manual does not set new standards; instead it is a compilation of existing regulatory requirements, supervisory expectations, and sound practices for BSA/AML compliance.

Q: Will the manual provide guidance on how to design and implement a risk-based AML program? Will examiners use a banking organization's risk assessment when scoping an examination?
A: The manual reinforces the agencies' and FinCEN's position that sound BSA/AML risk management enables a banking organization to identify BSA/AML risks and better direct its resources, with the ultimate goal of protecting the organization from potential abuse for money laundering or terrorist financing. The scoping and planning section and appendix I -"Quantity of Risk Matrix" provide examiners and the banking industry guidance on assessing BSA/AML risk. As part of the scoping and planning process the examiner will turn first to the banking organization's risk assessment If the organization has not developed a risk assessment, or if it is considered inadequate, then the examiner must complete a risk assessment.

Q: Who should an individual contact if they have questions about the new manual?
A: Questions regarding the FFIEC BSA/AML Examination Manual should be directed to the district or regional office of your federal banking agency.

Outreach Meetings: We Need to Be There!
In order to fully understand the variety of issues that may be raised from the release of the manual, the agencies are planning a series of outreach meetings. First, there will be nationwide conference calls regarding the procedures for the banking industry on August 2, 3, and 4. Each two-hour conference call will begin at 1:00 p.m. EDT.

Additionally, the federal banking agencies will conduct regional outreach meetings. The FFIEC BSA/AML Examination Manual will be presented in detail at the approximately three-hour sessions including a question and answer period.

The regional outreach event on August 22nd in New York will be simulcast over the Internet. The web address for this event will be publicly released in advance of the event. For information on registering for the telephone and the regional programs, go to www.fincen.gov

Since ABA has stressed that the problem with examination inconsistency has been, in part, the lack of examiner training, the industry needs to take this opportunity to participate in the outreach meetings to both ask questions and offer suggestions.

The half-day regional meetings will be held at the following locations:

Date

August 15
August 17
August 19
August 22
August 24
Location

San Francisco - Hyatt Regency Embarcadero
Dallas - Federal Reserve Bank of Dallas
Chicago - Federal Reserve Bank of Chicago
New York - City University
Miami - Intercontinental West Miami
Event Time

9 am (PDT)
9 am (CDT)
1:30 p.m. (CDT)
9 am (EDT)
9 am (EDT)

In addition to the meetings mentioned above, ABA will continue its role as co-chair of the Bank Secrecy Act Advisory Group (BSAAG) in monitoring both implementation and training under these procedures. Please feel free to send any continuing questions or concerns you have to me at Jbyrne@aba.com

Look at the release of this manual as an opportunity to improve your BSA compliance program and for the agencies to improve their oversight of our industry.

John Byrne, Esq., is an advisor to the BANKERS' HOTLINE. He is Director of Center for Regulatory Compliance and can be reached at Jbyrne@aba.com

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 7, 7/05