Answer by Ryan Rasske:In today’s environment, regulators are looking very closely at how much involvement the Board of Directors have in a bank’s BSA program. It is critical that members of the Board fully understand changes in the federal regulations as well as developments within their institution. By asking a few questions, examiners will determine very quickly if the Board has adequate knowledge of the banks BSA program. While it is not a regulatory requirement for the BSA Officer to report directly to the Board, it is very important that the Board fulfills their BSA responsibilities:
- Must designate a qualified individual to serve as the BSA Officer and ensuring they have sufficient authority throughout the bank.
- Must approve the bank's written BSA/AML Compliance Program that addresses internal controls, independent testing, designating a BSA Officer and training for appropriate personnel.
- Must receive sufficient and frequent updates on the status of the banks BSA/AML program and notified of SARs filed.
- Should receive ongoing BSA training to understand the importance of regulations and ramifications of non-compliance.
In order to avoid any potential problems, it might be a good practice for the BSA Officer to personally interact with the Board (e.g. during quarterly Board meetings) and provide them with reports (verbal and/or written) that adequately describes the status of the bank’s BSA/AML program. This will clearly demonstrate to your regulators that the Board is involved and receives frequent communication on this very important topic.
Answer by Ken Golliher:Based on the following excerpt from the current version of the BSA/AML Examination Manual, if the BSA Officer does not report directly to the board you will need to be able to explain why not.
The line of communication should allow the BSA compliance officer to regularly apprise the board of directors and senior management of ongoing compliance with the BSA. Pertinent BSA-related information, including the reporting of SARs filed with FinCEN, should be reported to the board of directors or an appropriate board committee so that these individuals can make informed decisions about overall BSA/AML compliance. The BSA compliance officer is responsible for carrying out the direction of the board and ensuring that employees adhere to the bank’s BSA/AML policies, procedures, and processes.
First published on BankersOnline.com 10/02/06