BSA Excellence: Officer Trainingeoplugin.commpartners.com/fms/061011_Slides_Color.pdf · Acheiving BSA Excellence KAREN I. MARTINO GROUP, LLC 9 KAREN I. MARTINO GROUP, 17 LLC October

Acheiving BSA Excellence

KAREN I. MARTINO GROUP, LLC 1

KAREN I. MARTINO GROUP, LLC1

Welcome to Session Two…

BSA Excellence:BSA Excellence:BSA Excellence:BSA Excellence: Officer TrainingOfficer TrainingOfficer TrainingOfficer Training


October 11, 2006

Compliance Outsourcing Partnership Solutions

The Karen I. Martino Group

“ COPS”A Partner Only Firm

Specializing in:� BSA Independent Third Party Audits� Compliance Audits� Internal Audits� Loan Review� Co-Sourcing Services




October 11, 2006

About the partners…

� Karen I. Martino is president of Karen I. Martino Group, LLC. Prior to establishing C.O.P.S. in January 2005 Karen worked for 20 years at a regional community bank with over 2 billion is assets. There she was EVP-Director of Audit, Compliance & Security, reporting directly to the Audit Committee of the Board of Directors. She was a member of the Executive Management Team; participating in strategic planning and new product/services development. Karen is a Certified Internal Auditor and past President of the NY/NJ Chapter of the Financial Managers Society.

� Mary Marley is a partner in the Karen I. Martino Group, LLC. Prior to establishing C.O.P.S. in January 2005 Mary worked for 18 years at a regional community bank with over 2 billion in assets. There she specialized in finance as Controller with her most recent 7 years spent as VP of Loan Servicing. Mary chaired the Mortgage Servicing Committee of the NJ League of Community Bankers from January 2002 through December 2004.

� Stephanie Szatkowski is a partner in the Karen I. Martino Group, LLC. Prior to establishing C.O.P.S. in January 2005 Stephanie worked for 24 years at a regional community bank with over 2 billion in assets. Stephanie was a VP Retail Administration/Branch Operations/Sales. Her focus at the bank was on creating a branch structure to support a sales culture, development of a Customer Relationship Management Program (CRM), policy and procedure development to support internal controls and compliance. Stephanie is a former teacher for the Woodbridge Adult Education Night School.


October 11, 2006

Recap of Session One

Session one covered…� BSA/AML- Risk Assessment Process� Customer Identification Program (CIP) � Risk Rating Factors� High Risk Accounts Monitoring & Enhanced Due

Diligence � Anti-Money Laundering

???Questions???




October 11, 2006

BSA Excellence: Officer Training

Session Two – October 11, 2006� Currency Transactions Reporting � Designated Exempt Persons� Sales of Monetary Instruments � Funds Transfers � Information Sharing 314a & 314b� OFAC � Suspicious Activity Reporting � Training � Independent Testing � Additional Products and Services� Minimum Recommended Board Reporting Package � Best Practices


October 11, 2006

Currency Transactions Recordkeeping Requirements




October 11, 2006

Currency Transactions Currency Transactions Currency Transactions Currency Transactions Recordkeeping RequirementsRecordkeeping RequirementsRecordkeeping RequirementsRecordkeeping Requirements

� FinCen 104 (CTR)� The Bank must file a Currency Transaction Report (FinCen 104), with the

Internal Revenue Service (IRS), for each deposit, withdrawal, exchange of currency, or other payment, or transfer, which involves transactions in currency, if not exempted, of more than $10,000.00.

� Multiple currency transactions will be treated as a single transaction when the Bank has knowledge that they are by or on behalf of any person and result in either cash in or cash out totaling more than $10,000.00, during one business day.

� Deposits made at night or over a weekend will be treated as if received the next business day following the deposit.

� All reports must be filed with the IRS within 15 days(25 days if electronically filed) following the date of the transaction.

� The Bank must retain a copy of each report for a period of five years.


October 11, 2006

Polling QuestionPolling QuestionPolling QuestionPolling Question

What is your CTR volume?

____ under 50 a month____ under 100 a month____ under 250 a month____ over 250 a month____ Don’t Know




October 11, 2006


�� BSA Officer FunctionBSA Officer Function� Verify daily that all cash transactions requiring a CTR are

completed

� Verify accuracy of CTR� Ensure timely filing of CTR

� Source Documents:

– CTR

– System reports– CTR Log


October 11, 2006

Currency Transaction Currency Transaction Currency Transaction Currency Transaction Recordkeeping RequirementsRecordkeeping RequirementsRecordkeeping RequirementsRecordkeeping Requirements

� FinCen 105 � A report of international transportation of currency or monetary

instruments, with the commissioner of customs when currency or other monetary instruments exceeding $10,000.00 are transported, mailed or shipped to any place outside the United States or received from any place outside the United States.




October 11, 2006


�� BSA Officer FunctionBSA Officer Function� Determine validity of transaction.

� Verify that Form 105 is completed for all required transactions.� Ensure timely filing.

� Source Documents:– Form 105

– System reports– Form 105 Log


October 11, 2006

Designated Designated Designated Designated

Exempt PersonsExempt PersonsExempt PersonsExempt Persons




October 11, 2006

Exemption Exemption Exemption Exemption –––– Phase IPhase IPhase IPhase I

� Exemptions – Phase 1 Categories� A bank, to the extent of its U.S. operations� A department or agency of the U.S. of a state (including the

District of Columbia and U.S. territories), or any political subdivision of any state.

� Other entities established under federal, state or local law or interstate agreements, if they exercise “governmental authority”

� Any corporation or other listed entity, organization under law of any state or U.S. federal law, whose common stock is listed on the New York Stock Exchange or the American Stock Exchange or whose common stock is listed as a NASDAQ National Market Security.

� Any other subsidiary of the above


October 11, 2006

Exemption Exemption Exemption Exemption –––– Phase IIPhase IIPhase IIPhase II

� Exemptions – Phase II Categories� To the extent of its domestic operations, “non-listed business” that:

– Has maintained a transaction account at the bank for at least 12 months;– Frequently engages in transactions in currency with the bank in excess of

$10,000; and

– Is incorporated or organized under the laws of the United States or a state or is registered as and eligible to do business within the United States or a state.

� Withdrawals for Payroll - Any business customer with respect to its domestic operations and solely to withdrawal cash for the purpose of paying its United States employees in cash, who is other wise ineligible to be designated an exempt person.




October 11, 2006

Exemptions

� BSA Officer Functions:� Identify exemption potential� Verify exemption qualifications� Monitoring activity outside of exemption for possible SAR� Annual Review � Biennial Review and Certification � Source Documents:

– Internal Designated Exempt Persons Approval Form – Customer transaction history– Customer Profile/signature card– Designation of Exempt Persons Form (TD F 90-22.53)


October 11, 2006

Monetary Monetary Monetary Monetary

Instruments Instruments Instruments Instruments




October 11, 2006

Monetary InstrumentsMonetary InstrumentsMonetary InstrumentsMonetary Instruments

� Negotiable instruments purchased with currency totaling $3,000 to $10,000

� Information required to be maintained:- Branch location- Date of purchase- Account number of purchaser- Types of instruments purchased- Serial numbers of instruments purchased- Amount of sales in currency- Purchaser verification


October 11, 2006

Monetary InstrumentsMonetary InstrumentsMonetary InstrumentsMonetary Instruments

�� BSA Officer FunctionBSA Officer Function

� Ensure required information is obtained.� Ensure that the bank has monitoring procedures to

track multiple purchases of the same or different type of instruments.

� Ability to review and sort for unusual or suspicious activity.

� Source Documents:– System reports– Logs




October 11, 2006

Funds Transfers/Funds Transfers/Funds Transfers/Funds Transfers/

Wire TransfersWire TransfersWire TransfersWire Transfers


October 11, 2006

Funds Transfers/Wire TransfersFunds Transfers/Wire TransfersFunds Transfers/Wire TransfersFunds Transfers/Wire Transfers

Maintain a wire transfer form and/or retain the fol lowing information for incoming and outgoing wires for at a minimum of $3,000 or more:

� The name and address of the originator� The amount of the funds transfer� The date of the funds transfer� Any payment instructions received from the originator with the payment

order� The identity of the beneficiary’s bank� The following items as are received with the payment order – name and

address of the beneficiary, the account number of the beneficiary and any other specific identifier of the beneficiary.

� Verified to OFAC listing.




October 11, 2006

Funds Transfers/Wire TransfersFunds Transfers/Wire TransfersFunds Transfers/Wire TransfersFunds Transfers/Wire Transfers

�� BSA Officer FunctionBSA Officer Function� Ensure required information is obtained, recorded

and retrievable� Ensure OFAC is checked (each time)� Ensure wire transactions are being captured in

regular transaction reports� Ability to review and sort Log for unusual or

suspicious activity� Source Documents:

– Wire Transfer Form – Log


October 11, 2006

Information Sharing Information Sharing Information Sharing Information Sharing

314a & 314b314a & 314b314a & 314b314a & 314b




October 11, 2006

Information Sharing 314a & 314bInformation Sharing 314a & 314bInformation Sharing 314a & 314bInformation Sharing 314a & 314b

� Contact Person� Maintain Documentation

� Secure and Confidential


October 11, 2006


–– BSA Officer FunctionBSA Officer Function

� Ensure procedure for obtaining FinCen requests� Ensure method of system searches� Ensure search and response is timely� Evaluate positive matches to see if a SAR is

warranted� Source Documents:

– FinCen requests– Tracking verification




October 11, 2006


� Does the Bank voluntary share information (section 314(b) of the USA Patriot Act)

� Requirements same as 314(a) once certificate is obtained.

� Must be reviewed annually


October 11, 2006

Q & A Break

� Select *1 now to ask a live question through the phone

� OR

� Type your question into the chat box in the lower left corner of the screen and click on the “Send”button located right below the box.




October 11, 2006

OFAC


October 11, 2006

OFACOFACOFACOFAC

� Appointment of the individual responsible for monitoring compliance with OFAC regulations

� Completion of a Risk Assessment, at a minimum to include:– Customer Base– Customer/Non-Customer Electronic Banking Activity– OFAC Verification Methods– Known or possible OFAC violations– Refer to risk assessment program




October 11, 2006

OFACOFACOFACOFAC

� Identification of software used to screen, detect, interdict, block and reject

� Maintaining a list of prohibited countries, entities and individuals

� Comparing new accounts to the OFAC listing (Retail Lending, Wires)


October 11, 2006

OFACOFACOFACOFAC

� Periodically checking/comparing established accounts to the OFAC listing

� Method of verifying whether an initial OFAC hit is a valid matchor false hit

� Reporting all blockings and prohibited transactions to OFAC within 10 days of occurrence

� Reporting annually on the blocked assets� Include in Training Program




October 11, 2006

OFACOFACOFACOFAC

BSA Officer FunctionBSA Officer Function

� Verify the software used to check OFAC� Ensure timely scrub of data base� Ensure new relationships are verified� Ensure procedure for false positive hits� Ensure procedure for reporting of suspicious activity� Source Documents:

– Software– Scrub reports– OFAC blocked and or rejected reports.


October 11, 2006

Suspicious Activity Suspicious Activity Suspicious Activity Suspicious Activity

ReportingReportingReportingReporting




October 11, 2006

Suspicious Activity ReportingSuspicious Activity ReportingSuspicious Activity ReportingSuspicious Activity Reporting

The basics…� Insider involving any amount � Transaction of $5000 or more where suspect has been

identified

� Transaction of $25,000 or more regardless of potential

� Notification to Board of Directors

� Confidentiality

� Safe Harbor


October 11, 2006


� Detection Process� Investigation Process� Reporting Process




October 11, 2006


Detection Process

� Identification of transactions and/or activities� Employee Awareness� Monitoring Reports


October 11, 2006


Refer to Suspicious Activity Investigation Form Link 1




October 11, 2006


Investigation Process� Investigation form� Gather all customer information and

transactions� Make decision� Be consistent with decision� Document results (why or why not)� Maintain investigation files


October 11, 2006


Reporting Process

� Completion of SAR form� Second Review� Board Reporting




October 11, 2006


� BSA Officer Function:� Ensure procedures for all business units to start investigation of

possible suspicious or unusual activity� Investigate – gather facts and information� Ensure SAR was completed in accordance with FinCEN instructions� Sufficiently detail content to describe the suspicious activity� Ensure Bank maintains file of supporting documentation� Ensure SAR was filed within timeframes � Ensure SAR filing was reported to Board� Ensure SAR and supporting documentation are retained in secured

location


October 11, 2006

Suspicious Activity ReportingSuspicious Activity ReportingSuspicious Activity ReportingSuspicious Activity ReportingBSA Officer’s Function

� Source Documents– Employees– System Reports– CTRs / CTR Log– Monetary Instruments Logs– Wire Transfers Log– CIP/High Risk Account Transactions Monitoring– Criminal subpoenas and National Security Letters– OFAC Matches– FinCEN Tracking forms or logs– Suspicious Activity tracking log– Investigation form




October 11, 2006

Training


October 11, 2006

TrainingTrainingTrainingTraining

� Performed at least annually � Regulatory requirements� Bank’s internal policies, procedures and processes� Risk Assessments� “Know your customer” procedures� CIP� Reporting and proper completion of CTRs� Designated Exempt Persons




October 11, 2006


� Sale/Purchase of monetary instruments � Examples of money laundering cases and the methods in which

activities can be detected/resolved/reported� Identifying and reporting of suspicious activity or alleged criminal

conduct� Wire Transfers� OFAC� Information Sharing Sections 314 a & b � Record Retention


October 11, 2006


�� BSA Officer FunctionBSA Officer Function� Ensure training program is part of Board approved Policy� Ensure training is ongoing when needed� Includes all appropriate personnel including the BOD � Timely for new hires� Documented to include; dates, attendance and attendance records




October 11, 2006

Independent Testing


October 11, 2006

Independent TestingIndependent TestingIndependent TestingIndependent Testing

� Qualified Independent Parties� Scope

� Board/Committee Reporting




October 11, 2006


Testing Should be Risk Based and…� Validate Policy to Practice� Validate System Transaction Processing� Validate Bank’s BSA Risk Assessment� Validate Bank’s AML Monitoring Process� Evaluate Bank’s BSA/AML Compliance

Program


October 11, 2006


� BSA Officer:

� Ensure that Independent Testing is done by qualified personnel

� Review that Independent Testing program is comprehensive

� Follow-up on findings and recommendations




October 11, 2006

Additional Products and ServicesAdditional Products and ServicesAdditional Products and ServicesAdditional Products and Services

� ACH Transactions� Broker Dealer� Non-Deposit Investment Products� Insurance Products� 3rd Party Payment Processors� Privately Owned ATM (s)� Correspondent Accounts� Concentration Accounts


October 11, 2006


Refer to BSA BANK FACT FINDING WORKSHEET Link 2




October 11, 2006


� BSA Officers Function

� Included in BSA/AML Policy� Method of Identifying Risk� Know who you are dealing with� Included in Monitoring Activities


October 11, 2006

Board Reporting

Refer to BSA Compliance Board Report Link 3




October 11, 2006

Polling Questions

How Often do you meet with your Board?

___ Monthly___ Quarterly___ Never___ Other


October 11, 2006

Board Reporting

� Currency Transactions Reporting :Evaluate your CTR volume

FluctuationChange in Customer Base




October 11, 2006

Board Reporting

� Designated Exempt (how many, who, monitoring)

� OFAC (date of last scrub and positive hits)

� Information Sharing 314 a & b (last request and hits)


October 11, 2006

Board Reporting

Suspicious Activity Monitoring andReporting:� # of High Risk accounts� Accounts added or removed� EDD Results� SARs filed and Investigations Not Resulting

in a SAR� Identify Trends




October 11, 2006

Attaining BSA Excellence…wrap up

� Written Board Approved Policy � BSA Officer and Support Staff

� BSA/AML Risk Process� Monitoring � Independent Testing� Board Reporting� Training


October 11, 2006

BSA/AML/OFAC

� Resources

� http://www.ffiec.gov/bsa_aml_infobase/default.htm - FFIEC -BSA/AML - Guidelines and education and training website.

� http://Bankersonline.com – subscribe to compliance briefings.� http://FDIC.gov- subscribe to email subscriptions, examinations

manual

� http://FinCEN.gov- SAR guidance

� http://OCC.gov- publications guidance

� http://MSB.gov- registration requirements




October 11, 2006

Q & A Break

� Select *1 now to ask a live question through the phone

� OR

� Type your question into the chat box in the lower left corner of the screen and click on the “Send”button located right below the box.


October 11, 2006

Your feedback is important to us!Please complete the seminar survey.

� Simply click on the “Seminar Survey” in the LINKS area to the left of this slide.

� From the drop-down box at the top of the survey, choose the “BSA Excellence” series.

� Complete the survey and click on “Submit” to send us your responses

This concludes today’s program. Thank you for your participation.




October 11, 2006