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June 9, 2011

Association of International Bank Auditors BSA/AML Industry Trends Internal Controls and Audit Regina A. Stone Acting First Deputy Superintendent. June 9, 2011. BSA/AML Industry Trends. BSA/AML Compliance Officer. Independent Testing/Internal Audit. Internal Controls. BSA/AML Training.

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June 9, 2011

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  1. Association of International Bank Auditors BSA/AML Industry Trends Internal Controls and Audit Regina A. Stone Acting First Deputy Superintendent June 9, 2011

  2. BSA/AML Industry Trends • BSA/AML Compliance Officer. • Independent Testing/Internal Audit. • Internal Controls. • BSA/AML Training.

  3. BSA/AML Compliance Officer • Insufficient oversight of service providers/affiliates, both domestically and globally. • Limited or no reviews performed on information provided by consultants as to the effects on the overall applicability to the business activities.

  4. Independent Testing/Internal Audit • Incomplete testing of the BSA/AML Program. • Insufficient robust testing for determining if the requirements of the BSA law and regulations are met. • Inadequate oversight of independent testing conducted by global auditors of the global service providers/affiliates.

  5. Internal Controls • Solid foundation needed for the customer risk rating methodology. • Weak definition of risk factors employed in the customer risk rating methodology. • Customer risk rating methodology is inconsistently applied across the customer base.

  6. Internal Controls (Cont’d) • Officers and directors not properly identified nor screened for PEPs and negative news. • Lack interpretation of alerts/cases resulting non-documented closure. • Manual monitoring of transactions is inadequate for identifying unusual activity.

  7. Internal Controls (Cont’d) • No definitive system in place to reconcile transactions from the source system to the transaction monitoring system. • OFAC screening needs improvement in aligning the fuzzy logic with the inherent OFAC risk of the bank’s/branch’s operations.

  8. BSA/AML Training • Inadequate training of the bank’s/branch’s BSA/AML Program requirements resulting in either non-compliance or inconsistent interpretations of the bank’s/branch’s stated requirements. • Insufficient or non-existence of an escalation process to notify senior management of past due employees who have not completed the required annual BSA/AML training.

  9. “Food for Thought” • Emerging Risk • Full nature and effects unknown • Science/technology, regulatory, social trends • Risk of Uncertainty • What if after all risk management there is still the risk of being wrong • Internal Audit • Assessing the Risk Management Gaps • Interconnectivity/Interdependence Risk For Discussion Purposes Only

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