Risk-based Supervision and Your Next BSA/AML Exam

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The FFIEC released an update to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) examination manual on April 15, 2020 for the first time in six years.  As the trend has been with regulatory exams, a risk-based approach is how BSA/AML exams will be designed going forward.

Important Exam Manual Update: Be Proactive with Risk Assessments

Upon review, one notable change amongst the updates was the repeated use of the terms Money Laundering (ML) and Terrorist Financing (TF) throughout the manual.  It is abundantly clear that every bank is expected to adequately identify and assess the ML/TF and other illicit financial activity risks.  Utilizing these terms when updating your risk assessment, the bank’s policies and procedures, and overall vocabulary when referring to your BSA/AML compliance program, will demonstrate your bank being proactive.

The main thing to remember is the BSA Manual did not establish new requirements: it is an update intended to clearly distinguish mandatory regulatory requirements and supervisory expectations when reviewing the adequacy of the bank’s BSA/AML compliance program.

BSA examinations will begin to look and feel different as the examiners take more of this risk-based approach, but you will continue to see transaction testing and analytical reviews, and a focus on ensuring the bank’s compliance program includes:

  • a review of the bank’s system of internal controls;
  • determination of whether or not independent testing is being conducted;
  • verification if a BSA compliance officer has been designated;
  • confirmation that management and staff are appropriately trained; and
  • validation that adequate procedures are in place for CIP, CDD, and beneficial ownership.

Questions to Address:

  • Have we updated our bank’s BSA/AML risk assessment recently to make sure processes and procedures are adequate?
  • Have we assessed all appropriate Money Laundering (ML), Terrorist Financing (TF), and other illicit financial activity risks within the bank’s operations?
  • Do we have internal controls in place to mitigate and manage those ML/TF risks?

Examiners expect the policies, procedures, processes, and practices to align with the bank’s unique ML/TF and other illicit financial activity risk profile.  Now is the time to assure and monitor compliance with BSA regulatory requirements.

To read the new FFIEC manual, visit: https://www.ffiec.gov/press/PDF/FFIEC%20BSA-AML%20Exam%20Manual.pdf

 

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