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Leaders Credit Union Board Presentation

Leaders Credit Union Board Presentation. Bank Secrecy Act April 2007. BANK SECRECY ACT. Passed by Congress in 1970 Requires financial institutions to report information and keep records of certain monetary transactions Referred to as an “Anti-Money Laundering” law

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Leaders Credit Union Board Presentation

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  1. Leaders Credit UnionBoard Presentation Bank Secrecy Act April 2007

  2. BANK SECRECY ACT • Passed by Congress in 1970 • Requires financial institutions to report information and keep records of certain monetary transactions • Referred to as an “Anti-Money Laundering” law • Designed to identify the source, volume, and movement of currency and other monetary instruments into or out of the U.S. or deposited into financial institutions • The BSA was put into place to safeguard the U.S. financial system from the abuses of financial crimes, including money laundering, terrorist financing, and other illicit financial transactions

  3. BANK SECRECY ACT • Money Laundering Control Act of 1986 • Anti-Drug Abuse Act of 1986 • Currency and Foreign Transactions Reporting Act • Financial Recordkeeping and the Department of Treasury’s Reporting of Currency and Foreign Transactions rules • USA Patriot Act, 2001

  4. Source: Financial Crimes Enforcement Network (FinCEN)

  5. BANK SECRECY ACT • 12 USC 1818(s)(2) requires that the NCUA include a review of the BSA compliance program at each examination of a credit union. The NCUA may use their authority to enforce compliance with the BSA. • Regulatory agencies may take a range of actions in the event of a BSA violation • Criticism in examination report • Memorandum of Understanding • Cease and Desist order • Civil money penalties • Referral to Treasury

  6. BANK SECRECY ACT Civil Penalties for Violations • Federal banking agencies and FinCEN, respectively, can bring civil money penalty actions for violations of the BSA. In addition, to criminal and civil money penalty actions taken against them, individuals may be removed pursuant to 12 USC 1818(e)(2) for a violation of the AML laws under Title 31 of the U.S. Code.

  7. Significant Enforcement Actions • FinCEN issued two large civil money penalties in December 2006; Beach Bank in Miami, Florida for $800,000.00 and Foster Bank in Chicago, Illinois for $2,000,000.00. Violations included inadequate AML program, inadequate internal controls, failure to report suspicious activity, lack of independent testing, etc. • NCUA issued a “Cease and Desist Order” against the Dover N.J. Spanish American Federal Credit Union in February 2007 for substantial BSA compliance problems. ($15,000,000.00 with 4,000 members)

  8. BANK SECRECY ACT • Money Laundering – filtering money from illegal activities through the financial system to conceal illegal sources of income • Laundered money may be deposited or withdrawn in a series of transactions to hide the illegal activity

  9. BANK SECRECY ACT • Terrorist Financing • Intended to intimidate through the threat of violence • Goal – to compel a government or organization to do something, or refrain from doing something that will result in furthering the terrorist’s agenda • Ideological motivation • Legitimate, as well as unlawful, sources

  10. BANK SECRECY ACT • Terrorist illegal activities include: • Extortion • Kidnapping • Narcotics trafficking • Smuggling • Fraud schemes, such as identity theft

  11. BANK SECRECY ACT • Money Laundering Control Act of 1986: • Imposes criminal liability on a person or institution that knowingly assists in money laundering or who structures transactions to avoid reporting it • Financial Institutions must establish and maintain procedures designed to meet compliance guidelines according to BSA requirements

  12. BANK SECRECY ACT • Money Laundering Methods: • Currency smuggling • Structured deposits or withdrawals from accounts • Purchases of various types of monetary instruments • Credit, debit or stored value cards • Funds transfers

  13. BANK SECRECY ACT • BSA reportable transactions include: • Deposits or withdrawals of more than $10,000 in cash in a day • Purchase of monetary instruments (money orders, cashiers checks, travelers cheques) with more than $3,000 in cash • If member inquires about how to do the transaction without being reported, LCU must file a “Suspicious Activity Report”

  14. BANK SECRECY ACT • LCU complies with BSA as outlined in Board policy • Cash transactions exceeding $10,000 will be reported on a Currency Transaction Report form FinCEN104 • Suspicious Activity Reports are filed as required

  15. BANK SECRECY ACT • SUSPICIOUS ACTIVITY REPORTS • NCUA established thresholds for credit unions: • No threshold – If credit union is certain that an insider is connected with the known or suspected crime, reporting is required, regardless of the amount involved

  16. BANK SECRECY ACT • $5,000 threshold – Credit union will report crimes of $5,000 or more if it knows the identity of the suspect or suspects the following: • Transaction involves money laundering • Transaction is designed to specifically evade the BSA • Transaction has no apparent lawful purpose or is not the sort of transaction in which the account holder usually engages, and the credit union can determine no reasonable explanation for the transaction

  17. BANK SECRECY ACT • $25,000 threshold – The credit union must report all known or suspected crimes of $25,000 or more even if it does not know the identity of the suspect. • SAR reports are confidential. The member can NOT be told that a report has been filed. • Employees who are subpoenaed or requested to disclose a SAR must decline unless it is by FinCEN, an appropriate law enforcement agency, or supervisory agency • Disclosure of a SAR is a FELONY and could land the discloser in jail.

  18. BANK SECRECY ACT • LCU does not sell monetary instruments to non-members • LCU reviews a report daily, which tracks all transactions that require a Currency Transaction Report be filed when a member makes single or multiple deposits on the same business day equaling $10,000.01 or more. • The report also tracks transactions between $3,000 and $10,000 for tracking purposes of monetary instruments • Records are retained for all originated Wire Transfers • All records are retained for the required 5 year period

  19. BANK SECRECY ACT USA Patriot Act-Customer Identification Program (Board policy 10/1/2003) • Verify identity of any person seeking to open an account • Maintain records of documents used • Check for OFAC listing and SDN listing • ID Flag Verification through PAC

  20. BANK SECRECY ACT Compliance Programs and Procedures • Internal controls, policies and procedures to assure ongoing compliance • Independent Audit • Designate a BSA Compliance Officer • Ongoing training for Staff and Board

  21. Facilitated byRita McCaslin, EVP Bank Secrecy Act Leaders Credit Union Board Presentation

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