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#261042 - 10/26/04 03:59 AM OFAC - from ABA AML Conference
Kathleen O. Blanchard Offline

10K Club
Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,293
LONG POST!

OFAC Comments-ABA AML Conference Washington D.C. 10/25/2004

I promised Ken I would post a report on the OFAC session.

Expectations are definitely higher on OFAC. Examiners are looking for written programs with written risk assessments, etc.

Laurie Bender, Federal Reserve - OFAC Examination Process

“The bar has been raised since 9/11” - bank’s are expected to have an OFAC Program that is tested and audited, with employee training imperative, and instructions for what to do with hits in the screening process.

The OFAC review is conducted during the BSA exam. The Fed is developing enhanced OFAC exam procedures, consulting with other regulatory agencies. The new procedures take a program approach to OFAC, like BSA and AML.

The Fed (and presumably other agencies) will be looking for:

A written risk assessment of the bank’s OFAC program, taking into consideration:
Bank’s products
Bank’s customers
Transactions
Bank’s location

They will review:
How you receive your updates
Audit exceptions received by the regulators from OFAC (errors by banks not treated as violations with penalties.) The Fed is working on a sharing agreement with OFAC where OFAC can share with Fed (and vice versa) if a bank has an OFAC problem.
Policies, procedures and programs
Consideration of risk
Designation of responsible individual(s)
Appropriate internal controls
Independent testing of accounts to check for prior testing as required by your program, and to test the validity of the results. The regulator will be checking names in your transactions against OFAC list to check validity of your process. They expect you to be doing the same.
An SAR process describing when you will file SARs on OFAC hits. This was mentioned several times by different presenters as a very important part of the process. The regulators (including OFAC) are looking for a combined approach to SARs on OFAC hits. (Don’t hold your breath.)
Are you adequately assessing your risk?
Management oversight of program
Appropriate internal controls including who makes decisions on OFAC hits, who contacts OFAC
Audit process
Methods of screening - manual vs. automated - what parameters you set for filters, how your system’s matching works (complete name, fuzzy logic, etc.)

During OFAC counsel’s presentation he said that there is essentially no conflict between requirement for OFAC reporting and filing of a SAR - they are 2 different reports of different information going to different parties and there is no conflict and no duplication. Nonetheless the regulators are considered someway to bring the 2 items together.

Check payees: realize bank’s can’t check every payee on customers checks

Cashiers Checks: (In a later session, regulators were asked about need to check payees on cashier’s checks - response was that “the absolutely correct answer is that of course you should, but who is? It is a decision to be made in your risk assessment.”)

Fed is working with OFAC to obtain guidance on some screening issues: example, one bank had an OfAC problem because they didn’t screen a particular Arabic name to the 15th derivation!

Jamal El-Hindi, Attorney/Advisor OFAC

Discussed OFAC’s role. OFAC is an umbrella regulator over export in general with a broader mandate than Dept of State, etc. An OFAC sanction may be lifted but exports to country may still be blocked by Dept of State.

OFAC has jurisdiction over US citizens and permanent resident aliens located around the globe, ANY individual physically located in the US and, under the International Emergency Economic Powers Act programs, corporations organized under US law including foreign branches of US firms, and any corp. or company physically located in the UD, including US branches, agencies and reps of foreign corps.

Trend is shifting from comprehensive country sanctions to thematic list based . Caution: because someone is not on list, does not mean they are not sanctioned. Sanctions can cover anyone affiliated with, owned by, acting for an individual on list - all of those are also blocked. You as bank need to determine who that might be!

Contacting OFAC: OFAC is trying to get better about answering phones! If you just can’t get through and have an urgent need for an answer, you can try the Chief counsel’s office: 202-6222-2490 or 1800-540-6322. No guarantees that will help. If you really need to make a decision by a specific time and can’t get anyone from OFAC to answer or to get back to you, then you as a bank must make your own decision based on the facts you have.

Targeted countries: Transactions with Targeted countries (non-cooperative countries)- some are okay. Bank must decide! No specific prohibition.

What to report: Example: a ‘listed’ person comes to a bank branch and tries to send a wire. The wire is not sent. There are no funds to block, etc. There is really no requirement to notify OFAC - HOWEVER - keep in mind that the fact that this individual tried to conduct a transaction with a US bank may very well be of interest to OFAC. Encourage bank’s to do what makes sense - if this info may be of use to OFAC, let them know that this person tried to conduct a transaction. Think of the point of the rules - the government wants to know what transactions these individuals are conducting. Consider an SAR using same thought process.


Bank of America and Capital One reviewed their programs, need for risk based approach, need for formal program, training, centralized decisions on hits. Be prepared to discuss your risk decisions such as frequency of batch testing, etc.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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BSA/AML/CIP/OFAC Forum
#261043 - 10/26/04 06:39 PM Re: OFAC - from ABA AML Conference
Chicgolf Offline
100 Club
Joined: Jun 2003
Posts: 137
Westside
Kaybee & Ken,

Thank you for keeping the rest of the BSA/AML Compliance officers updated on the issues arising from the ABA Conference. For those of us who were unable to attend, this information you are passing along to us is very beneficial.

Many thanks for your efforts; however, my stress level has just risen in anticipation of the rigorous scrutiny to expect in the upcoming exams! Thank you Riggs and AmSouth Bank.
_________________________
These are just my own opinions...my body is here but my mind has already teed off...FORE!

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#261044 - 10/26/04 06:55 PM Re: OFAC - from ABA AML Conference
Pinkie CRCM Offline
Gold Star
Joined: Aug 2003
Posts: 399
KY
Duly noted and much appreciated! We non-attendees are waiting with baited breath to hear from each of you! Just got finished printing out the posts under the other posting. Thanks guys! You are doing a great job!!

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#261045 - 10/27/04 04:01 AM Re: OFAC - from ABA AML Conference
Kathleen O. Blanchard Offline

10K Club
Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,293
You are welcome! That post is now my OFAC "to do" list - everything to be checked before our January exam. I will review my notes from other sessions and post what seems useful - particularly today's last session when Ken had to leave. I stayed until the bitter end. There actually was an unusually large crowd right until the last moment at 5 p.m. - shows how serious a topic this has become. I am very glad I was able to attend.
Last edited by kaybee; 10/27/04 04:15 AM.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#261046 - 10/27/04 03:51 PM Re: OFAC - from ABA AML Conference
Anonymous
Unregistered

I was also in attendance at the conference and had the pleasure of meeting both Ken and Kaybee. Anyone who was in attendance at the conference must be back at their banks, reviewing and updating procedures. The transaction testing is something in particular that it appears the regulators will be scrutinizing. And it was good to hear that even though OFAC regulations don't exclude checking payees on cashier's checks, the regulators realize there is no easy way to do it, and won't cite us for not checking. But as Kaybee said, most attendees stuck it out right up to the last words of "This Conference Is Adjourned" were spoken at about 5:02 yesterday afternoon...very unusual...but again, it points out the importance of the subject matter and the regulators' stepped up enforcement of BSA/AML compliance. If things don't settle down in the next year, the 2005 attendance could top 1000. I was extremely surprised that there were not more attendees from Upstate N.Y., but as more Enforcement Actions are taken and other banks receive less than positive BSA exam results, the attendance at these types of gatherings will increase.

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#261047 - 10/27/04 03:54 PM Re: OFAC - from ABA AML Conference
Security Guy Offline
Gold Star
Joined: Oct 2004
Posts: 327
Upstate N.Y.
Oops, I posted Anonymously...should have been Security Guy.

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