On June 30, 2005, the Federal Financial Institutions Examination Council (FFIEC) issued the new Interagency Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. The manual is the result of a collaborative effort between the federal banking agencies and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The federal banking agencies are the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. In addition, through the Conference of State Bank Supervisors, state banking agencies played a consultative role. The federal banking agencies also conferred with the Office of Foreign Asset Control (OFAC) in the development of examination procedures to test compliance with sanctions administered by OFAC.
Why Were These Procedures Developed?
While these procedures do not set new rules or offer new guidance, the manual is designed to clarify regulatory requirements and examination expectations in an effort to enhance consistency and to ensure that examiners use a single framework at all financial institutions. This interagency manual is a significant step toward consistency in the area of BSA/AML examination, and it promotes a shared understanding of the regulations and supervisory expectations surrounding BSA/AML compliance.
What Did Not Change with the New Examination Procedures?
As previously mentioned, the manual does not set new standards; instead, it is a compilation of existing regulatory requirements, supervisory expectations, and sound practices for BSA/AML compliance. To foster consistency, the manual includes examination procedures that will be used by each federal banking agency’s examiners. In addition, all state banking agencies were invited to the outreach events announcing the release of these procedures, and these agencies have full access to the new manual. The states also commented during the drafting stage and participated in the field testing.
The requirement for banks to develop, administer, and maintain an effective BSA/AML compliance program remains the same. The program should be documented, approved by the board of directors, and noted in the board minutes. Furthermore, the compliance program for state member banks must meet the following minimum requirements as required by the Code of Federal Regulations (CFR) Regulation H, Section 208.63(c):
What Can Bankers Expect to See During an Examination?
To provide examiners with the ability to tailor each examination to the profile of a specific banking organization, the manual uses both “core” and “expanded” examination procedures. The core procedures are the foundation for all BSA/AML examinations. They cover all BSA and related regulatory requirements and include procedures for scoping and planning examinations, including an emphasis on a bank’s own risk assessment. These core procedures also include guidance on reviewing the components of the BSA compliance program and reviewing the policies and procedures to support compliance with sanctions administered by OFAC. The expanded procedures address specific lines of business, products, or entities that will present unique challenges for which the institution should establish appropriate policies, procedures, and processes. Not all core and expanded procedures will be applicable to every institution. At a minimum, bankers can expect the following during a BSA/AML examination:
The new BSA/AML Examination Manual became effective as of the third quarter of 2005. A complete copy is posted on FFIEC's website at www.ffiec.gov/bsa_aml_infobase/pages_manual/manual_online.htm. This site provides an automated search function to facilitate easy navigation of the manual’s 330 pages. In addition, information is provided on related BSA/AML laws and regulations, guidance on preparing quality suspicious activity reports (SARs), common indicators and “red flags” for potentially suspicious activity, a comprehensive list of acronyms and abbreviations, and frequently asked questions. Any questions regarding the new manual may be directed to Examiner Jacqueline P. Fenton at (215) 574-6234.
The views expressed in this article are those of the author and are not necessarily those of this Reserve Bank or the Federal Reserve System.