Bankers and compliance officers seeking guidance on complying with federal money laundering rules have gotten their wish.
Federal banking agencies and a bureau of the U.S. Dept. of the Treasury have issued a manual to help examiners comply with anti-money laundering laws. The Bank Secrecy Act/Anti-Money Laundering Examination Manual (see box at right), issued June 30 by the Financial Institutions Examination Council, offers guidance for carrying out BSA/AML and Office of Foreign Assets Control examinations and on identifying and controlling risks associated with money laundering and terrorist financing.
While the 331-page manual is aimed at examiners, its publication is being hailed by members of the banking community who say the guidance it will offer has been sorely needed.
"Previously, there was a vacuum; banks have been looking for guidance and for parameters on what it is that they're supposed to be doing to comply with BSA and money laundering laws and regulations," said Clemente Vázquez-Bello, a shareholder in the Miami office of Gunster Yoakley. "In the past, though there was some guidance from FinCEN [Financial Crimes Enforcement Network], there was none from the regulators."
As a result, the manual is considered an important step in ensuring the consistent application of regulatory guidance across the banking industry. "The regulators hadn't issued any real significant guidance; this is the first time they've come up with a comprehensive manual for examiners," added Vazquez-Bello. "By telling examiners what they're supposed to look for in terms of compliance with the BSA and AML regs, banks can understand what is it that they have to have in place."
Addressing Different Standards
The manual doesn’t set new standards, but serves as a compilation of existing regulatory requirements, supervisory expectations, and sound practices for BSA/AML compliance. Federal banking agencies will begin using the manual during the third quarter of 2005.
The manual includes a section on "Scoping And Planning," which provides examiners and the banking industry guidance on assessing BSA/AML risk. Echoing guidance on Section 404 of Sarbanes-Oxley that was recently issued by the Securities and Exchange Commission and the Public Company Accounting Oversight Board, the manual states that an examiner must take into account the organization's risk profile, weighing numerous factors against eachother.
In addition, the manual also includes expanded sections on a variety of bank customers and entities, including "non-bank financial institutions" like casinos; offshore corporations; professional service providers; and "cash-intensive businesses" like retail stores and parking garages.
Observers say the need for such guidance is being driven by the Patriot Act and other new regulations stemming from the Patriot Act, along with an increased focus on anti-money laundering rules in the wake of high-profile enforcement actions such as those against Riggs Bank. Earlier this year, Riggs Bank pleaded guilty to money laundering charges, agreeing to pay $16 million for failing to report suspicious activity in certain accounts.
“The long-awaited guidance could not have come too soon,” said John Byrne, director of the American Bankers Association Center for Regulatory Compliance, in a statement shortly after the manual was released. “Bankers and compliance officers around the country will be relieved to have one set of rules and interpretations that they and the agencies’ field examiners can agree on.”
Byrne added that the manual “should go a long way toward achieving consistency in the interpretation and enforcement of our anti-money laundering laws.”
In addition to providing guidance about AML and BSA obligations, the guide “addresses a criticism from institutions that the various agencies have been applying different standards when it comes to anti-money laundering examinations,” according to Satish Kini, a partner in the Washington office of Goodwin Procter. “It’s supposed to provide guidance to institutions and consistency among the regulators.”
As an example, Kini said it addresses a concern among banks, “that examiners were second-guessing or applying unfair standards in their examination process,” particularly in the area of suspicious activity report filings. “The guide makes it clear that if banks have good SAR decision-making processes in place, examiners shouldn’t second-guess them,” Kini said.
The manual is the product of collaboration between the Financial Crimes Enforcement Network, a bureau of the Treasury, and the five members of the Federal Financial Institutions Examination Council—the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the National Credit Union Administration. The Office of Foreign Assets Control assisted in the development of the sections of the manual that relate to OFAC reviews.
"This interagency manual is a significant step toward consistency in the area of anti-money laundering examination,” said Federal Reserve Board Governor Susan Schmidt Bies. “We look forward to ongoing dialogue with the industry on these important issues, and encourage the banking industry to take part in the upcoming outreach sessions."
The manual is structured to allow examiners to tailor the BSA/AML examination scope and procedures to the specific risk profile of the banking organization.
FinCEN and FFIEC have planned a series of conference calls and regional outreach meetings to brief the banking industry and field examiners on the manual next month. Details and the manual are available in the box above, right.