banks secrecy act

On April 15, 2020, the members of the Federal Financial Institutions Examination Council (FFIEC)  released updated sections and related examination procedures to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual (Manual)  which provide instructions to examiners when assessing the adequacy of a bank’s BSA/AML compliance program. The Manual was last updated in 2014.  In the current revision, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and State Liaison Committee (Agencies) collaborated with FinCEN in revising the Manual.  Revisions include:

  1. Risk-Focused BSA/AML Supervision
  2. Assessing BSA/AML Compliance
  3. BSA/AML Risk Assessment

The BSA/AML Manual provides a roadmap for Financial Institutions regarding how Bank Examiners evaluate Financial Institutions during the examination process.

OFAC statement in the Updated Manual

The updated manual states that “Office of Foreign Assets Control (OFAC) regulations are not part of the BSA, and an OFAC review is not required during each examination cycle”. Nonetheless, the updated manual indicates that OFAC compliance programs are assessed in conjunction with BSA/AML examinations.

Determining whether to include a review of OFAC compliance in the scope of an examination is based in a bank’s:

  • OFAC risk profile
  • The number, dollar amount, and type of international activity
  • The size or complexity
  • The organizational structure  

What is the role of a Federal Banking Regulatory Agency with respect to OFAC?

To evaluate the sufficiency of a bank’s implementation of policies, procedures, and processes for complying with OFAC-administered laws and regulations; NOT to identify apparent OFAC violations.

What if OFAC compliance is part of the review?

In this case, examiners should also review the bank’s OFAC risk assessment and related independent testing to determine the appropriate scope of the review.

OFAC determines violations of its regulations

The previous BSA/AML Examination Manual (2014) stated that: “OFAC requirements are separate and distinct from the BSA, but both OFAC and the BSA share a common national security goal. For this reason, many financial institutions view compliance with OFAC sanctions as related to BSA compliance obligations; supervisory examination for BSA compliance is logically connected to the examination of a financial institution’s compliance with OFAC sanctions.”

There is “Convergence” taking place

Financial Institutions ought to be aware that government agencies, including the U.S. Treasury, FinCEN, and the federal banking agencies (Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and Office of the Comptroller of the Currency (OCC) are coming together as “a single unit” of information sharing and regulation.  There is an “interrelation” taking place as a result of the analysis capabilities that “Big Data” offers when combined with technical capabilities and artificial intelligence. 

Financial Institutions ought to consult their OFAC Compliance Expert.