Is your Financial Institution impacted by the BSA/AML Examination Updates?
This blog was authored by my colleague Karen Leiter, Regulatory Compliance Director.
On June 21, 2021 the FFIEC posted additional updates to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. These changes follow four updates made in February 2021. Industry expectation is the manual will receive continual updates throughout the upcoming months. As with most examiner guidance, the manual itself does not establish requirements for financial institutions rather it provides a succinct outline for financial institutions to model their BSA program. Further, it should be noted these are updates and not new requirements. The language used in the updates works to add clarity between mandatory regulatory requirements and guidance/supervisory expectations.
The key updates posted February and June 2021 include:
Assessing Compliance with Bank Secrecy Act Regulatory Requirements
This new section to the manual calls out that in addition to BSA/AML program requirements, financial institutions must comply with other program, reporting, and recordkeeping requirements; special information sharing procedures; and special standards of diligence, prohibitions, and special measures set forth in 31 CFR Chapter X Part 1020. Although the rules for financial institutions are set forth in Part 1020, many of the specific requirements cross-reference to 31 CFR Chapter X Part 1010.
Customer Identification Program (CIP)
This is the minimum information that a financial institution is required to obtain from an individual to form a reasonable belief that they know the true identity of each customer. While there is nothing newto call out, the manual expanded on some sections that help make your institution’s CIP go from decent to great. There are many nooks and crannies in CIP, taking the time to read through the FFIEC manual compared to your program will not be wasted!
Currency Transaction Reporting (CTR)
A financial institution must file a CTR for each transaction in currency (deposit, withdrawal, exchange of currency, or other payment or transfer) of more than $10,000 by, through, or to the financial institution. This update provides a handful of answers to those odd-ball CTR questions that come up from time to time. The manual now incorporates some guidance on CTR Aggregation for Businesses with Common Ownership (FinCEN FIN-201-G001) and other examples of CTR aggregation that occur in your institution.
Transactions of Exempt Persons
Financial institutions may exempt certain types of customers from currency transaction reporting. If you do not have a handful of exempt customers and you file repetitive CTRs pay close attention to this next part: §1020.315 Transactions of Exempt Persons says that there is recognition that the routine reporting of some types of large currency transactions does not necessarily aid law enforcement authorities and may place unreasonable burden on banks. Consequently, a bank may exempt certain types of customers from currency transaction reporting. What does this mean to you? Exempt those qualifying customers! The more the merrier, just do not forget to do your annual due diligence!
Purchase and Sale of Monetary Instruments (MI) Recordkeeping
The manual added a section that calls out the “logging” requirements for those purchasers with and without a deposit account. The update to the manual outlines the Guidance On Interpreting Financial Institution Policies In Relation To Recordkeeping Requirements Under 31 C.F.R. §103.29 and the process of managing the cash associated with the purchase of a negotiable instrument. Depositing cash prior to the purpose of a negotiable instrument DOES NOT alleviate the need to log and retain the record of cash. Additionally, the manual outlines “Contemporaneous Purchases”, simply stated the institution needs to aggregate cash used to purchase negotiable instruments when they exceed $3,000. Make sure that your system knows how to aggregate those smaller MI purchases for reporting when it exceeds the magic $3,000 amount!
Minor Wording Changes
As with any update, there are always minor wording changes that help to clarify language. Some of these areas were:
- Special Measures – a process that allows for “special measures” to be taken relating to targeted money laundering and terrorist financing for covered institutions. In a basic summation, there are five special measures, one through four impose recordkeeping, information collection and reporting requirements. The fifth special measure allows FinCEN the authority to impose conditions on opening or maintaining payable through or correspondent accounts with a foreign financial institution relating to money laundering concerns.
- Reports of Foreign Financial Accounts (FBAR) – A United States person (including a financial institution) must file an FBAR if that person has a financial interest in, or signature or other authority over, one or more financial institution, securities, or other financial accounts in a foreign country, and the aggregate maximum value of the accounts exceeds $10,000 at any time during the calendar year.
- International Transportation of Currency or Monetary Instruments Reporting (CMIR) – Each person (including a financial institution) who physically transports, mails, or ships, or who causes, attempts, or attempts to cause the physical transportation, mailing, or shipment of currency or other monetary instruments in an aggregate amount exceeding $10,000 at one time out of or into the United States must file a Report of International Transportation of CMIR.
How we can help
CLA’s team of Regulatory Compliance Consultants spend 100 percent of their time helping financial institutions comply with regulations. Rather than conducting tests, delivering a report, and walking away, we can sit down and talk through options so you can fix problem areas. We test your institution against the requirements outlined by federal consumer protection laws and regulations, so you’re the first to know about risks in your financial institution. Contact Us to learn how we can help you.
Susan is a CPA with more than 20 years of combined experience in public accounting and the financial institution industry, including experience with Fortune 500 financial services companies. Susan serves as the managing principal of CLA’s financial services group. Her responsibilities include providing engagement oversight in the areas of assurance and internal audit. In addition, Susan provides board advisory and management consulting services in the areas of strategic planning and mergers and acquisitions. Susan has been involved in multiple mergers and acquisitions of sizes ranging from $150 million to $500 billion with engagement at all stages of the process.
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