There are four pillars of an effective BSA/AML program. What is it and why do it matter.
Managing Bank Secrecy Act/Anti-Money Laundering risk requires careful planning and governance.To properly identify, measure, monitor, and control its risks, a credit union should establish a sound BSA/AML program.Credit unions can be adversely affected by regulatory enforcement actions.
Development of internal policies, procedures and related controls, designation of a compliance officer, thorough and ongoing training program, and independent review for compliance are some of the pillars of an effective BSA/AML program.
Credit unions are required to periodically perform a risk assessment of their programs.
The BSA/AML Risk Assessment is an important tool for documenting the effectiveness of your program.
Specific risk categories, such as products and services, members and entities, and geographic location, should be identified as part of the credit union's risk assessment.Electronic banking, funds transfers, and automated clearinghouse transactions are some of the products and services that may pose a higher risk of money laundering.Big cities vs. rural settings pose a higher risk for criminal enterprise activity and should be addressed.
The CU has a core processing database that can be used to measure the risk.It's a good idea for a credit union to risk-score members at opening account.The completeness and accuracy of the member profile data is of paramount importance.
Through the use of software, transaction monitoring can be done efficiently.An effective BSA/AML program will require some form of automated monitoring tools.
It is important for the automated BSA/AML monitoring software to have rule sets that are meaningful and efficient in detecting suspicious activity.If you don't file a suspicious activity report within 90 days, you will face fines.Civil money penalties can be caused by ineffective BSA/AML monitoring.Credit unions should consider automated model reviews.The rule sets and function of the model are reviewed.The testing of historical rule sets can be used to confirm that transactions designed to represent red flags are actually being captured.
An experienced BSA officer can identify areas that pose a risk and recommend ways to control them.Basic BSA/AML training should be given to everyone in the organization.The officer should be alert for multiple cash transactions on new accounts that could indicate attempts to circumvent a currency transaction report being filed.A customer could parcel a $12,000 cash transaction, which would require a CTR filing, into four separate $3,000 cash transactions over the course of a few days.
Appropriate initial and periodic validation of the monitoring tools should be ensured by the BSA officer.There are a lot of unreviewed exceptions in the program.Prompt filing of currency transaction reports and SARs should be ensured by senior management.
Ensuring adequate ongoing training is performed is one of the things the BSA officer should be accountable for.
In training, employees need to be taught how to report suspicious activity.In aCU, employees are taught to value and respect every member.When the basic mindset is geared to member service it can be hard to report member activity.Training and encouragement to know your members is an important control for any program.Online training, annual in-person training and encouragement that managers keep training top of mind are some of the forms of training that should be taken.
A sound framework for the effective functioning of the BSA/AML program can be provided by an independent review.The BSA/AML automated tool should be tested for effectiveness against the overall member risk profiles by the independent review.An annual review by management is needed to make sure the CU complies with regulatory standards.Recommendations should be addressed to strengthen the program.
James M. Deitch is the CEO of Teraverde.He is a thought leader in community and mortgage banking, having served as CEO of four community banks.He served on the Mortgage Bankers Association's Board of Governors for three terms, representing a community bank lender.He is a Certified Mortgage Banker, and has extensive secondary marketing experience as well as extensive regulatory experience with the Office of the Comptroller of Currency, the Federal Deposit Insurance Corp. and state regulators, especially in the residential lending and community banking areas.There is a CPA at Teraverde.