Florida DBPR Anti-Money Laundering Conference

August 23, 2013SAR and CTR Primer: Monitoring, Gathering, and Evaluating Suspicious Activity

David BatlleArea Financial Manager

Office of Financial RegulationState of Florida

Bank Secrecy Act: CTRs and SARs

Pari-Mutuel/Casino Operators

Depository Institutions – Banks

Criminal Activity, Money Laundering, and Terrorist Financing are Not Politically Correct

Italian Mafia – Sopranos

Nigerian Scams

Al Qaeda versus Timothy McVeigh

BSA/AML PerspectiveCat People – Dog People;

ET Believers – No ET; BSA Believers – BSA Nonbelievers:

“Bankers should not be forced to act as cops, jury, judge and God.”

“When the money leaves this bank, I don’t care where it goes.”

It is unreasonable for the government to require the bank to act as a “CIA Agent.”

Currency Transaction Report

CTR filing required for over $10,000.

Filing required for multiple transactions over $10,000.

SAR filing also required if “structuring” to avoid CTR filing is believed.

Suspicious Activity ReportBSA/AML Program: Each bank shall develop and provide for the continued administration of a program reasonably designed to assure and monitor compliance with recordkeeping and reporting requirements…of the BSA.

BSA/AML Pillars:

• Provide for a system of internal controls to assure ongoing compliance (written policies and procedures);

• Provide for independent testing for compliance to be conducted by bank personnel or by an outside party (annual independent program audit);

• Designate an individual or individuals responsible for coordinating and monitoring day-to-day compliance (BSA Officer); and

• Provide training for appropriate personnel (annual training for all personnel – teller to boardroom).

BSA/AML Program ComponentsPillar requirements: Written policies and procedures; independent audit; BSA Officer; and training.• BSA Officer – qualified with adequate delegated authority.• Risk Assessment – products, services, and market.• Customer Identification Program (CIP) and account activity profile – normal and

expected activity; PEP involvement.• High-risk account designation – type of business; type of activities; volume of

activity; risk to the bank.• Enhance Due Diligence (EDD) of high risk accounts.• Automated account monitoring software; adverse public information.• SAR Review Committee; written investigation – file or not file in 30 days.• Board of Directors reporting and oversight – “tone at the top.”

SAR Filing Required for Suspicious ActivityIs the suspicious activity money laundering?

Does not need to meet standard of “beyond reasonable doubt” or even “preponderance of evidence.”

“Guilt by association?”

Information resources: LexisNexis; World-Check; Google; Mugshots.com; OFAC List.

Retail or wholesale: the teller line or the executive suite; the 3 stages of money laundering.

Three Stages of Money Laundering1. Placement

2. Layering

3. Integration

“None of that information is relevant…tell me what I need to do in this bank.”

Must have an understanding of what is happening in the outside world, only then can you understand what is happening in the bank – or casino.

Designated BSA Officer should be expert in the financial signature of criminal activity, as well as bank operating systems and BSA/AML regulations.

PlacementStash house “smurfing” at $9,800 multiple transactions.

Bulk currency through “underground economy.”

http://www.miamiherald.com/2013/03/19/3295434/mexican-currency-brokers-charged.html

Casino Chips

http://www.orlingrabbe.com/casinoml.htm

LayeringWire transfers; RDC; stored value; PayPal; commodities (cigarettes); ACH…

IVTS: Black Market Peso/Currency/Grey Market Real; Hawala; Hundi; Fei Qian

FinCEN Advisory: http://www.fincen.gov/news_room/rp/advisory/pdf/advisu9.pdf

Latin American – based money remitter not remitting money to Latin America.

Beacon Hill/Farol da Colina at $6.5 billion: http://www.the-american-interest.com/article-bd.cfm?piece=465

IntegrationPablo Escobar, Colombia

https://officialrecords.broward.org/oncoreV2/showdetails.aspx?id=5054097&rn=2&pi=0&ref=search

Lo Hsing Han, Myanmar (Burma)

http://www.economist.com/news/obituary/21582234-lo-hsing-han-heroin-king-and-business-tycoon-died-july-6th-aged-about-80-lo-hsing-han

SAR Filing WeaknessesDollar amount limited to small volume reviewed; not indicative of overall activity.

Unreasonable threshold for suspicion – insider culpability/negligence.

All suspects not identified, or limited to inclusion in narrative.

Defensive SAR.

Data dump.

Activity exceeds normal and expected levels.

Consequences for BSA/AML Program Deficiencies

Just say “no”: http://www.fdic.gov/news/news/financial/2007/fil07071.html

Offshore: Layering and IntegrationOffshore is not always offshore: “I don’t export money, I import laws.”

Forbes 7/23/12: $21 trillion offshore; U.S. GDP $17 Trillion in 2012.

Stanford Financial: low profile and high volume; or high profile and low volume.

Tax avoidance: transfer pricing.

PATRIOT Act of 2001: Al Taqua and EDD for offshore correspondent accounts.

Payable through accounts; PICs; bearer share corporations.