BSA AML OFAC Flashcards

Question

8.1 BSA / AML / OFAC | What are the benefits of an effective CDD Program?

Answer 1

* Preventing unusual or suspicious transactions in a timely manner that potentially exposes the institution to financial loss or increased expenses; * Avoiding criminal exposure from individuals who use the institution's resources and services for illicit purposes; and * Ensuring compliance with BSA regulations and adhering to sound and recognized banking practices

Answer 2

* Be commensurate with the institution's BSA/AML risk profile, paying particular attention to higher risk customers, * Contain a clear statement of management's overall expectations and establish specific staff responsibilities, and * Establish monitoring systems and procedures for identifying transactions or activities inconsistent with a customer's normal or expected banking activity.

Answer 3

* Non-bank financial institutions (NBFIs), including money service businesses (MSBs); * Electronic banking; * Wire transfer activities; * Special use accounts; * Payable-through accounts; * Numbered accounts; * Private banking activities; * Foreign correspondent banking relationships; * Pouch activities

Answer 4

``` • Casinos or card clubs; • Securities brokers/dealers; and • Money Service Businesses (MSBs) >> Currency dealers or exchangers; >> Check cashers; >> Issuers, sellers, or redeemers of traveler's checks, money orders, or stored value cards; >> Money transmitters; and >> U.S. Post Offices (money orders). ```

Answer 5

* Develop regulations that require insured financial institutions to establish and maintain procedures reasonably designed to assure and monitor compliance with the BSA; * Review such procedures during examinations; and * Describe any problem with the procedures maintained by the insured depository institution within reports of examination.

Answer 6

• A system of internal controls; • Independent testing for compliance with the BSA and Treasury's regulation 31 CFR Part 103 ;• The designation of an individual or individuals responsible for coordinating and monitoring day-to-day compliance with BSA; • Training for appropriate personnel.

Answer 7

* Failure to adequately identify and report large cash transactions in a timely manner; * Failure to report Suspicious Activities, such as deposit layering or structuring cash transactions; * Failure to reasonably identify and verify customer identity; and * Failure to maintain adequate documentation of financial transactions, such as the purchase or sale of monetary instruments and originating or receiving wire transfers.

Answer 8

* Negligent violations of any regulations under 31 CFR 103 shall not exceed $500; * Willful violations for any reporting requirement for financial institutions under 31 CFR 103 can be assessed a civil penalty up to $100,000 and no less than $25,000; * In the of C&D violations cases, the penalty is established by Section 8(i)(2) of the FDI Act can be up to $5,000 per day for each day the violation continues

Answer 9

* Section 311: Special measures enacted by the Treasury for jurisdictions, financial institutions, or international transactions or accounts of primary money laundering concern; * Section 312: Special due diligence for correspondent accounts and private banking accounts; and * Section 313: Prohibitions on U.S. correspondent accounts with foreign shell banks.

Answer 10

* Structuring is the most common suspicious activity reported to FinCEN; * Structuring is defined as breaking down a sum of currency that exceeds the $10,000 * CTR reporting level per the regulation, into a series of transactions at or less than $10,000.

Answer 11

* Placement, * Layering, and * Integration

Answer 12

* Involves the placement of bulk cash into the financial system without the appearance of being connected to a criminal activity; * The simplest way is to deposit cash into a financial institution; * To avoid notice, banking transactions involving cash are likely to be conducted in amounts under the CTR reporting thresholds; this activity is referred to as "structuring."

Answer 13

* The process of moving and manipulating funds to confuse their sources as well as complicating or partially eliminating the paper trail; * Layering may involve moving funds in various forms through multiple accounts at numerous financial institutions, both domestic and international, in a complex series of transactions

Answer 14

* Typically follows the layering stage; * Integration can be accomplished simultaneously with the placement of funds; * The integration phase is used to create the appearance of legality through additional transactions such as loans, or real estate deals; * These transactions provide the criminal with a plausible explanation as to where the funds came from to purchase assets and shield the criminal from any type of recorded connection to the funds.

Answer 15

* Transferring funds by check or monetary instrument; * Exchanging cashier's checks and other monetary instruments for other cashier's checks, larger or smaller, possibly adding additional cash or other monetary instruments in the process; * Performing intrabank transfers between accounts owned or controlled by common individuals (for example, telephone transfers); * Performing wire transfers to accounts under various customer and business names at other financial institutions; * Transferring funds outside and possibly back into the U.S. by various means such as wire transfers, particularly through "secrecy haven" countries; * Obtaining certificate of deposit (CD) secured loans and depositing the loan disbursement check into an account (when the loan is defaulted on, there is no loss to the bank); and * Depositing a refund check from a canceled vacation package or insurance policy.

Answer 16

* Inflating business receipts, * Overvaluing and undervaluing invoices, * Creating false invoices and shipping documents, * Establishing foreign trust accounts, * Establishing a front company or phony charitable organization, and * Using gold bullion schemes.

Answer 17

* Refusal or reluctance to proceed with a transaction, or abruptly withdrawing a transaction, * Customer refusal or reluctance to provide information or identification, * Structured or recurring, non-reportable transactions, * Multiple third parties conducting separate, but related, non-reportable transactions. (This activity is often referred to as "smurfing."), * Even dollar amount transactions, * Transactions structured to lose the paper trail, * Significant increases in the number or amount of transactions, * Transactions which are not consistent with the customer's business, occupation, or income level, * Transactions by non-account holders.

Answer 18

* DOE or IAP / Any Amount * Known Suspect / $5M * Unknown Suspect / $25M * Note: Part 353 says transaction of $5M or $25M, not potential loss. * If you file a SAR, you must also file a CTR if the cash transaction is over $10M.

Answer 19

* 30 calendar days; however, * If management is unable to identify a suspect within 30 days, reporting may be delayed until the earlier of an additional 30 calendar days or until a suspect is identified, * Cannot be delayed more than 60 calendar days

Answer 20

A known or suspected crime is committed against the institution, there is actual or potential loss to the institution of $5M or more, and possible suspect(s) (not an employee, officer, director, agent, or IAP) can be identified

Answer 21

A unknown or suspected crime is committed against the institution, there is actual or potential loss to the institution of $25M or more, and a potential suspect cannot be identified.

Answer 22

* DOE or IAP * Known or suspected crime with potential loss of = > $5M * Unknown or suspected crime with potential loss of = > $25M

Answer 23

* Criminal Activity / $5M - A financial transaction of $5M or more was conducted or attempted using the institution as a conduit for criminal activity, * The funds involved in the transaction were derived from illicit activity, the purpose of the transaction was to hide or disguise funds from illicit activities, or the purpose of the transaction was to evade the BSA requirements.

Answer 24

* The examiner should instruct the financial institution to immediately file the SAR, * If the financial institution refuses, the examiner should complete the SAR and cite violations of Part 353 of the FDIC's Rules and Regulations, providing limited details of suspicious activity or the SAR in the Report of Examination, * In instances involving a senior officer or director of the financial institution, examiners may prepare the SAR, rather than request the financial institution to do so in order to ensure that the SAR explains the suspicious activity accurately and completely, * Each Regional Office is responsible for monitoring SARs filed within that region, * Examiner-prepared SARs should be forwarded to their Regional Special Activities Case Manager to ensure timely and proper filing, * Any examiner-prepared SARs and all supporting documents should be maintained in the field office files for five years.

Answer 25

* OFAC administers laws that impose economic and trade sanctions based on foreign policy and national security objectives, * Sanctions have been established against various entities and individuals such as targeted foreign countries, terrorists, international narcotics traffickers, and those engaging in activities relating to the proliferation of weapons of mass destruction, * Collectively, such individuals and companies are called Specially Designated Nationals (SDNs) and Blocked Persons.

Answer 26

* Blocking of assets, * Trade embargoes, * Prohibition on unlicensed trade and/or financial transactions, * Travel bans, and * Other financial and commercial prohibitions.

Answer 27

* OFAC imposes reporting requirements for blocked property and blocked or rejected transactions. * It requires financial institutions to report all blocked property to OFAC annually by September 30th. * Financial institutions must notify OFAC of blocked or rejected transactions within 10 days of their occurrence. * When an institution identifies an entity that is an exact match, or has many similarities to a subject listed on the SDN and Blocked Persons List, the institution should contact OFAC Compliance for verification. * Unless a transaction involves an exact match, it is recommended that the institution contact OFAC Compliance before blocking assets.

BSA AML OFAC Flashcards

(51 cards)