Regulators Update BSA/AML Exam Manual Sections

Just in time for a effective date of FinCEN’s Customer Due Diligence (CDD) and Beneficial Ownership Rules, on May 11, 2018 a Federal Financial Institutions Examination Council (FFIEC) published updates to its Bank Secrecy Act/Anti-Money Laundering Examination Manual The FFIEC is an interagency body comprised of member of a U.S. Federal Reserve Board, a FDIC, OCC, CFPB, NCUA, and state banking regulators.  The agencies’ changes (1) reinstate existent CDD sections of a primer and (2) supplement new Beneficial Ownership overview and hearing procedures sections, in any box analogous to a new CDD and Beneficial Ownership requirements.

The announcement of this new calm was announced through separate press releases by a FDIC, OCC, and NCUA.  The OCC’s release (OCC Bulletin 2018-12) creates a technical infer that a new CDD calm replaces pages 56-59 of a FFIEC manual, final updated in 2014, and a FDIC’s release (FIL-26-2018) adds that a new sections will be incorporated into a primer in a subsequent update.  The FFIEC’s hearing primer is used by a bank regulators in conducting supervisory BSA/AML exams and facilities step-by-step hearing procedures to be used by examiners, unchanging with a FFIEC’s orthodox purpose of substantiating uniform forms and regulatory examination processes.

One doesn’t generally design new concrete superintendence or interpretation to emerge from a FFIEC hearing procedures, though a hearing of this new content emphasizes a following:

(1) BSA/AML exams including scope periods on or after May 11, 2018 will underline inspection of new accounts non-stop on or after that date.  At this point, a CDD and Beneficial Ownership manners are live and in full effect, and institutions will be approaching to belong to them.  For example, a revised examiner’s guide specifies:  “3. On a basement of a risk assessment, before hearing reports, and a hearing of a bank’s hearing findings, name a representation of new accounts non-stop for authorised entity business given May 11, 2018 to hearing for correspondence with a Beneficial Ownership Rule.”  The transition and doing duration for this order is strictly over.

(2) CDD as we formerly accepted it is also in a past.  While a regulators have elite to report CDD as fundamental to questionable activity monitoring, and so a long-standing requirement, a new manners annotate these expectations and meant that certain “best practices” are now a law.  In many ways a nine-page revised CDD overview and hearing procession request is a some-more interesting; a Beneficial Ownership request closely mirrors new FinCEN superintendence and a new order itself.  For example, a prior CDD hearing procedures specified that examiners should:  “Determine either policies, procedures, and processes concede for changes to a customer’s risk rating or profile.  Determine who is obliged for reviewing or commendatory such changes.”  The new calm provides:  “Determine either policies, procedures, and processes enclose a transparent matter of management’s and staff’s responsibilities, including procedures, authority, and shortcoming for reviewing and commendatory changes to a customer’s risk profile, as applicable.”  Similarly a revised overview affirmatively states that a bank’s “procedures should infer who in a classification is certified to change a customer’s risk profile.”  The primer includes additional new fact on a sufficiency of patron risk rating processes, and how regulators should proceed them:

  • “Improper marker and comment of a customer’s risk can have a cascading effect, formulating deficiencies in mixed areas of inner controls and ensuing in an altogether enervated BSA correspondence program.”
  • “Similar to a bank’s altogether risk assessment, there are no compulsory risk form categories and a series and fact of these categorizations will change formed on a bank’s distance and complexity.  Any one singular indicator is not indispensably pliant of a existence of a reduce or aloft patron risk.”
  • “Examiners should essentially concentration on either a bank has effective processes to rise patron risk profiles as partial of a altogether CDD program. Examiners might hearing particular patron risk decisions as a means to exam a efficacy of a routine and CDD program. In those instances where a bank has an determined and effective patron risk decisionmaking process, and has followed existent policies, procedures, and processes, the bank should not be criticized for particular patron risk decisions unless it impacts a efficacy of a altogether CDD program, or is accompanied by justification of bad faith or other aggravating factors.” (emphasis added)

(3) The effective date of a CDD and Beneficial Ownership rules outlines a vital miracle in the law of U.S. financial institutions.  These manners relate those of certain general jurisdictions, and a announcement of these revised hearing procedures simulate (for improved or worse) a perfection of many years of rulemaking, analysis, and doing efforts by dedicated law enforcement, patron service, IT, and correspondence professionals.  Only time will tell accurately how these new manners will be enforced; a grade to that they deter and display rapist activity; how good their compared burdens will become; and either they will infer to be a concentration of regulatory service efforts.

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