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2012 AML ISSUES AND TRENDS Presented by Connie Fenchel President AML Experts, Inc.

2012 AML ISSUES AND TRENDS Presented by Connie Fenchel President AML Experts, Inc. 2012 REGULATORS’ EXPECTATIONS Address, correct and document prior exam findings If issues not addressed, explain at onset of exam before examiner finds again Lack of staff or funding = no excuse.

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2012 AML ISSUES AND TRENDS Presented by Connie Fenchel President AML Experts, Inc.

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  1. 2012 AML ISSUES AND TRENDS Presented by Connie Fenchel President AML Experts, Inc.

  2. 2012 REGULATORS’ EXPECTATIONS • Address, correct and document prior exam findings • If issues not addressed, explain at onset of exam before examiner finds again • Lack of staff or funding = no excuse

  3. 2012 REGULATORS’ EXPECTATIONS • Heightened CIP/Due Diligence Procedures • Non-US residents • Commercial/Business • High Volume/Velocity • Third party verification

  4. 2012 REGULATORS’ EXPECTATIONS • Customized Risk Assessment (not cookie cutter) • Enterprise-wide • Qualitative and quantitative analysis • Clearly defined inherent and residual risks • Update - particularly with new products

  5. 2012 REGULATORS’ EXPECTATIONS • Monitoring • Internal/External Account Transfers • ACH Transactions • Loan and Trade Finance Transactions • Geographic Location • Volume/Velocity • ATM Activity

  6. 2012 REGULATORS’ EXPECTATIONS • Monitoring • Active involvement in establishing thresholds and criteria • Based on Risk Assessment – But don’t just monitor High Risk Accounts (Ocean Bank) • Not based on staffing restraints • Regular tuning based on documented methodology

  7. 2012 REGULATORS’ EXPECTATIONS • Training • Documented and Current • Company-Wide • Board of Directors • Relevant

  8. 2012 REGULATORS’ EXPECTATIONS • Independent Review • Adequate scope (enterprise-wide, all LOB’s, etc.) • Qualified, independent reviewer • Timely • Addressed prior exam/review deficiencies • Transaction testing and sample sizes

  9. 2012 REGULATORS’ EXPECTATIONS • Internet Banking Authentication Procedures • Identify risks • Mitigating risks • Testing • Employee and customer awareness

  10. 2012 REGULATORS’ EXPECTATIONS • Third Party Payment Processor Accounts • Background check of processors and merchants • Underwriting and review of merchants (telemarketers = high risk) • Fraud monitoring (i.e. high return rate of remotely created checks – Wachovia penalty)

  11. 2012 REGULATORS’ EXPECTATIONS • FinCEN Mandated Electronic Filing of BSA Forms • Proposal – stay tuned • Effective 6/30/12 • New forms extension until 3/31/13

  12. 2012 ISSUES AND TRENDS • OFAC • Written Policy/Procedures • Separate Risk Assessment • Cautionary Letters • Civil Money Penalties • Egregious/Non-egregious • Voluntary Self-disclosure • Other Enforcement Actions

  13. 2012 ISSUES AND TRENDS • Consumer Financial Protection Bureau (CFPB) • Supervise certain consumer financial services companies and large depository institutions and their affiliates for consumer protection purposes • Supervision and Examination Manual http://www.consumerfinance.gov/guidance/supervision/manual/ • Recent news re Payday Loans, Wire Remittances

  14. 2012 ISSUES AND TRENDS • Prepaid Access Rule • Exclusions • Closed-loop with max of $2,000 in one day, defined merchant • Access to funds provided by government agency • Health Reimbursement Arrangements (HRA) • Providers – primary responsibility • Sellers – AML awareness

  15. 2012 NEW FRONTIERS • Mobile Payments • Remote payments • SMS text messaging • Wireless internet on mobile device • Proximity payments • Chip on mobile device • Barcode displayed on mobile device • Access device readers plugged into mobile device

  16. 2012 NEW FRONTIERS • Social Payments • Prepaid, virtual “currency” • Usable within a defined, social networking environment • Dollar based/points based • “Daily deal” prepaid vouchers

  17. 2012 NEW FRONTIERS • Mobile and Social Payments • Compliance Concerns • May or may not be a money transmitter – ask them to get legal opinion • May be a payment processor (EDD) • Determine who is responsible for CIP on customers • Ensure partner is required by agreement to comply with your AML/KYC standards • Review AML controls/Independent Reviews • Include contractual right to request periodic audits

  18. 2012 THREATS • Investment Fraud (Ponzi) • Scott Rothstein Case (Miami) $1.2B Fraud, 50 years jail • Gibraltar – Julie Ansari = my idol! • TD $67M • Victims of schemes suing banks • Be aware of red flags ($200,000 in overdraft fees - $64M overdraft, volume/velocity wires- $15M, “wined, dined and bullied execs” ) • Document action • Regulator attention

  19. RECENT PENALTIES • Frank Mendoza $25,000 – Bribery – SAR disclosure • Ocean Bank $11M • FDIC C&D 4 yrs prior • Prior lookback = $259M SARS – 100,000 alerts • No Documentation foreign customers • Mohamed Sheikh $25,000 • MSB xfers to West Africa • Credit Union account

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