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#28184 - 08/16/02 07:10 PM Timing of OFAC & Terrorist List Checking?
Anonymous
Unregistered

As we look at the Section 326 proposals we are trying to develop good risk-based procedures for ensuring a customer does not appear on one of the government lists. It has been suggested that for products like consumer and mortgage loans that are "lower risk" for money laundering it may be acceptable to perform the checking against the lists when the loan is booked to our online system. This is obviously after the loan has been closed and funds disbursed. This check could be automated to ensure it is completed. Checking the list for customers applying for deposit accounts would occur right at application. I realize that if we made a loan to a party on the OFAC list, we would have a violation. But I would have better controls to ensure the list checking is done when the account (loan or deposit) is added to our mainframe. The proposal is silent to the timing issue for list checking.

Are you all checking names for deposits and loans at the application point?

Thanks.

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General Discussion
#28185 - 08/16/02 07:18 PM Re: Timing of OFAC & Terrorist List Checking?
Lestie G Offline

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I'm not sure how this will be approached by the regulators - but the common sense that we've applied to it is that it's OK (even better) to check the deposit accounts after the account is opened. That way, if there's a hit, you have something to hold for OFAC. On loans, however, if you let the money out of the bank, as you have stated, you can't really comply with OFAC.

Also, since you're focusing on complying with the Section 326 requirements, remember that the main purpose of those is to stop terrorist financing. At least the 9/11 terrorists dealt in smaller dollar amounts - making consumer loans a little higher on the list.
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#28186 - 08/16/02 09:39 PM Re: Timing of OFAC & Terrorist List Checking?
SJB Offline
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California
Confused -

You need to check loan applicants at the time of application. Your regulator will nail you if your policy is to wait until after funds are disbursed.

As far as controls, make the senior underwriter responsible for checking the OFAC lists before the application even starts the underwriting process. We have Loan Processing run the online OFAC check and put a copy of the "no match" printout in the file. You can audit loan files to make sure this was done.
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#28187 - 08/16/02 09:51 PM Re: Timing of OFAC & Terrorist List Checking?
Comply 101 Offline
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Confused

I thought I read somewhere that some of the major credit bureaus were going to institute an OFAC search as part of their product offering. This would make sense and solve the problem of checking the list before we fund the loan. Has anyone else heard about this?

These are my opinions and not those of my employer.
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#28188 - 08/16/02 10:05 PM Re: Timing of OFAC & Terrorist List Checking?
Princess Romeo Offline

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Yes - I have heard that Experian at least will institute an OFAC check in their credit report, but I have not heard when this will happen.

In the meantime, we have set up a procedure where, anytime a personal or business credit report is requested, that name is checked against the OFAC list.
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#28189 - 08/16/02 10:22 PM Re: Timing of OFAC & Terrorist List Checking?
Anonymous
Unregistered

All applicants for loans, new accounts, trust applicants, insurance, any application for any service are checked with the OFAC list at time of application.

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#28190 - 08/16/02 10:27 PM Re: Timing of OFAC & Terrorist List Checking?
Tina A Sweet Offline
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Tina A Sweet
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Marysville, Ca.
On my CIP I will be instructing all to check at application. Where are you at on this project? As I go I find that there is more and more to document. I found under section 103.121(b)(1) General Rule that the CIP statutorily prescribed procedures, describes these procedures, and details certain minimum elements that each of the procedures must contain. Are you implementing the BSA portion in regards to the BOD or are you writing into this program the same requirments as the BSA program. I have new procedures for CIP, but they are a sub section of the BSA program, thus staying in compliance with the CIP being under the BSA program.

Let me know. And thanks in advance
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#28191 - 08/17/02 07:11 PM Re: Timing of OFAC & Terrorist List Checking?
Anonymous
Unregistered

Checking the OFAC list at application can be done easlily enough, but what is everyone doing about checking the Control list? Is that also something that must be checked at application? I don't deal with that personally, but our CIP procedures should address it if necessary.
Leslie

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#28192 - 08/18/02 01:27 AM Re: Timing of OFAC & Terrorist List Checking?
Andy_Z Offline
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Currently the control list is a short lived item. Your account base has to be compared against it when it is published, but not on an ongoing basis.

Based on those instructions it won't be necessary to check this according to 326 as a government list, I wouldn't believe. Is anyone aware if this will change?
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#28193 - 08/19/02 03:05 PM Re: Timing of OFAC & Terrorist List Checking?
Suwannee Offline
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Florida
Bonnie, after reading your post, I went to Experian's website and looked for info on OFAC. Looks like they already have this program in place. And, it does not cost any extra for the service.

Office of Foreign Assets Control (OFAC) Name Matching Service

Launched in May of 2002, this automated, online service offers financial institutions a quick and convenient way to comply with government-imposed regulations to verify that a new customer’s name does not appear on the Treasury Department’s listing of Specially Designated Nationals and Blocked Persons. The persons on this list are identified as dangerous and a threat to national security. Experian offers this resource exclusively to its clients at no cost.
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#28194 - 08/19/02 03:33 PM Re: Timing of OFAC & Terrorist List Checking?
redsfan Offline
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I was in a meeting last week with an OCC district counsel discussing this issue. His opinion was that the Control List was meant to be included in the definition of government-issued lists we would have to check. Our BSA/AML coordinator questioned him about the difference in the directions published with the list and the proposed rule, and got the same response - check the Control list as part of your CIP.

This district counsel is part of the OCC's KC district AML taks group, for what that's worth.

Obviously, there is some confusion about the control list. It just became part of my comment letter on the issue.
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#28195 - 08/19/02 03:50 PM Re: Timing of OFAC & Terrorist List Checking?
Michelle D Offline
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I have also been informed by the OTS that the expect the control list to be checked. They went so far as to state that it should be checked against all outgoing wires. I argued, they called DC and we are now checking the control list against outgoing wires.

Therefore, I expect that the control list would be part of the "government lists" that 326 is talking about.
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#28196 - 08/19/02 05:03 PM Re: Timing of OFAC & Terrorist List Checking?
AnonRegulator Offline
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Two things about the FBI control list. First, if you don't have ongoing procedures to check new customer names against it, I suggest you do so. There was an unfortunate set of FAQs distributed with one of the subsequent updates to the list. One of the questions asked if checking against the control list was an ongoing deal or a one time shot. The written answer says it is a one time shot. However, it was intended that you would continue to check new customer names against the list. The answer to that FAQ understandably caused confusion so many banks did not set up procedures. I think the best evidence that we wanted you to check new customers against the control list is the PATRIOT requirement to check customer names against a government provided list of known or suspected terrorists. That will be a requirement come October 25 anyway. Currently, the only such lists are the control list and OFAC's list.

But not to worry, due to my second item. I believe the FBI control list, per se, will become a moot point. As you know, section 314 of the PATRIOT act also calls for increased sharing among financial institutions and law enforcement authorities, with FinCen acting as the clearinghouse. I believe the FBI list will be fed to FinCen along with all the other stuff out there, and FinCen will publish a list of known or suspected terrorists against which you will compare your customer names in satisfaction of section 326. AR.

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#28197 - 08/19/02 06:58 PM Re: Timing of OFAC & Terrorist List Checking?
Princess Romeo Offline

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Anon Regulator - I appreciate your response. I also realize that you have no say-so in how all of this got handled or will be handled. But if it’s at all possible for you to relay this frustration in the banking industry, then please read on:

This entire Control List issue has been very mystifying, confusing, and frustrating. First - the Control List was so "super-secret" that only one select person in an institution was to receive this list. Second - When the Control List was being issued, institutions were told that this list had to be tightly controlled and not to be disseminated to the staff. Third - we received the instructions that the Control List was for a one shot search looking backwards.

NOW - we are getting conflicting information that we should have been checking all new accounts against the Control List. If this is true, are the same restrictions in place on who can receive this list? Are we supposed to still only have one select person, or perhaps just a handful of sworn-to-secrecy persons to check ALL NEW ACCOUNTS against the list?

There are too many ambiguities that exist with respect to the Control List. Yes check it... no don't check it... yes you can have it in your OFAC software... no you cannot... yes your staff should be checking the list... no your staff should not have access to the list...

I'm all in favor of fighting terrorism, but I'm a little weary not knowing if I am breaking the law or not.
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Regulations are a poor substitute for ethics.
Just sayin'

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#28198 - 08/19/02 07:26 PM Re: Timing of OFAC & Terrorist List Checking?
Andy_Z Offline
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I share your frustration, Bonnie. And I second your request.

The catch is, what you stated we have in written form. What is being posted here is just that. While likely the way they want it to be, it isn't what they requested. We stand to be criticized either way. But for now, I'll need official direction before I change.

So how about it AR, if you can pass these comments up the chain, you'd earn the fees we pay and a few friends along the way.
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My opinions are not necessarily my employers.
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#28199 - 08/19/02 08:23 PM Re: Timing of OFAC & Terrorist List Checking?
AnonRegulator Offline
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The frustration has already been sent up the flag pole. For what it's worth, you shouldn't worry about being criticized for not having an ongoing check to the control list, as we recognize the unfortunate clarity of the FAQs. It's just that knowing the requirement to do this comes Oct 25 anyway, it might be a good idea to get geared up sooner rather than later, not that that would be a source for criticism either.

As for the secretiveness of the list, I don't know the answer to that, but I suspect it will continue in a similar fashion since FinCen will probably be involved. AR.

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#28200 - 08/19/02 09:05 PM Re: Timing of OFAC & Terrorist List Checking?
Princess Romeo Offline

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In reply to:

As for the secretiveness of the list, I don't know the answer to that, but I suspect it will continue in a similar fashion since FinCen will probably be involved. AR.



And therein lies one of the greatest sources of frustration. If the list is to be kept so darn secretive, how are we supposed to check it for each and every individual & business entity for each and every transaction we conduct?

If we have to limit the knowledge of the list to one or even just a few persons, it could bottleneck our entire operation. (And I'm using the collective "our" since I'm sure just about every bank, credit union, savings and loan, etc., etc. will have a similar problem.)

Seriously, someone needs to sit down and write out some reasonable guidelines with respect to the handling and use of the CONTROL list.
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CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#28201 - 08/19/02 09:15 PM Re: Timing of OFAC & Terrorist List Checking?
DawgFan Offline
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In reply to:

If we have to limit the knowledge of the list to one or even just a few persons, it could bottleneck our entire operation.




I couldn't agree more. In fact, I seem to remember a BOL report on the good ol' Control list being sent to the CEO of the bank. I can see it now, "Mr. CEO, we need you to review these 500 new accounts against this list." Yep, that should go over real well. I think I am going to make two clones of myself. That way, one clone can check the control list, the other can do all my other work, and I'll go play golf !
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#28202 - 08/20/02 01:29 PM Re: Timing of OFAC & Terrorist List Checking?
AnonRegulator Offline
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Gee, I sense a little venting going on here. Let's take a look at this secretiveness issue. It sounds like some banks protect the list more than others.

The instructions to the control list merely said to "treat the Control List and all updates with the utmost confidentiality as disclosure may compromise the ongoing investigation." That leaves a lot of room for flexibility on who can see it.

I think we can all agree that the list certainly shouldn't go to anyone outside of the bank. I think we can also agree that it needs to go to more people in the bank than just the CEO. Somewhere in between is the proper number, a number for individual banks to figure out for themselves. This is no different than all the other confidential information housed in the bank. I'm sure not everyone in the bank has unfettered access to all information, and for good reason. The information is given to at least those that need to know it. The Control List should be handled the same way.

When I originally commented on the secretiveness of the list, I was referring to the need to protect information that can compromise ongoing investigations, not on the need for banks to needlessly restrict access to the list from those that need it. AR.

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#28203 - 08/20/02 02:20 PM Re: Timing of OFAC & Terrorist List Checking?
Andy_Z Offline
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While we're "venting" just a bit. When reality really kicks in, how super secret can it be when it is e-mailed, unencrypted. The common analogy is an e-mail is like a postcard. And it is. Others can read it along the way and it can even be backed-up on their systems.
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#28204 - 08/20/02 03:11 PM Re: Timing of OFAC & Terrorist List Checking?
Last Mango Offline
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AR’s quote of the instruction is accurate. Taken literally, one might say that all bank employees could know about the list as long as every employee keeps the information confidential by not disclosing names to the public, including their spouses. Now a prudent person would say there is no need for the maintenance staff and other non-front line personnel (except for those needing access for investigative purposes) to have access to the Control List. And, I would agree with that position. However, when I received the Control List I read this quoted line as I believe any person with SAR experience would. This list is a “secret” list, not to be treated as standard confidential loan customer information accessible by much of the front line staff but a list to be guarded as you would in a fraud investigation.

Those of us with SAR training and experience are taught to restrict the disclosure of investigation information to as few employees as possible. The reason for restrictive disclosure is to lessen the legal and reputation risk of the bank in case an employee either purposefully or accidentally discloses information to either the public or the target of the investigation. As you know, it is illegal to inform the target of an investigation that a SAR has been filed. And, if an employee informs the public of an investigation, and such investigation proves fruitless, you can bet a lawsuit will follow. So, is it any wonder that some of us have a conservative interpretation of the Control List request?

Some bankers or regulators may say that searching for these names are technically pre-SAR and therefore this activity has less of a requirement for confidentiality as opposed to a “hit” and the subsequent formal SAR investigation. However, an advisory from the FDIC stated “We trust that you appreciate the sensitive nature of the investigation and will exercise appropriate discretion.” Should we have interpreted this message as an Okey Dokey to give all CSRs and loan officers access to the Control List for review? Under the impending rule, are we to believe the “sensitive nature” is no longer valid?

I am currently at a small community bank but have worked at a large community bank. I know employees make mistakes and I know that sometimes an employee may put the friendship of a customer above the bank’s best interest. I cannot imagine giving access to the “sensitive” Control List to every CSR and loan officer. In my little university town, it is hard to keep secrets. Also, I certainly cannot imagine doing this in a multi-state billion dollar bank where the risk of encountering a “hit” may be greater.

If banks will be forced into checking the Control List for all new customers and the Control List is to remain “sensitive”, subjecting banks to potential legal risk, I predict many banks will take a conservative approach and strictly control the access to the documents. This practice will create a bottleneck in processing account applications. The government must provide guidance on this issue.

Any opinion expressed above is personal, not intended as legal advice, certainly not the opinion of my employer, and may be worth as much as it cost.
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#28205 - 08/20/02 04:47 PM Re: Timing of OFAC & Terrorist List Checking?
Princess Romeo Offline

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Doug - you hit the nail on the head. If we are to be checking the control list on every new loan and every new account, then we need our New Accounts (CSR's) and Loan Assistants to have access to the Control List. However, CSR's and Loan Assistants are rather junior positions in most banks and NOT the type of position that you would normally disclose sensitive information.

If we have to limit the information to a few people that have a more senior position, then we again face the bottleneck and perhaps the need to HIRE a senior person to act as the list checker.

I agree Doug - the powers-that-be need to issue some much clearer guidance because what they have written is much different that what they have been saying.

And here's the zinger - If a BANK were to do something along those lines, say their Loan Policy or BSA Policy said one thing but the bank practices were another, that bank would be in SERIOUS trouble with the authorities.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#28206 - 08/21/02 02:24 PM Re: Timing of OFAC & Terrorist List Checking?
redsfan Offline
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In a meeting with regional counsel from OCC recently, we were told that the control list is included in the "government-issued" lists under the rule. I intend to aks for clarification in my comment letter, and suggest you do the same. If they say include it, then I think we will do wahtever is necessary to ensure that the list is compared to our new and current customers. If that means the list is more widely available, so be it.
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#28207 - 08/26/02 07:25 PM Re: Timing of OFAC & Terrorist List Checking?
complyguy Offline
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PA
I'm just starting to catch up after filling in for others for the last two weeks (one guess who does my work when I'm gone). The OCC recently reviewed our BSA program and asked about when we check the OFAC and Control lists. I asked whether the requirement to check government lists constituted authority to distribute the Control List to CSRs, lenders, etc. The examiner did not know and said she would get back to me. I'm still waiting, and the clock's still ticking.

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