Bank Secrecy Act Policy

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Bank Secrecy Act Policy
Internal Revenue Service
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IRS BSA Jurisdiction

• FinCEN delegated BSA examination authority to IRS
  for
• Financial institutions not under supervisory
  authority of a federal regulator or
  self-regulatory organization
• Non-Bank Financial Institutions (NBFIs)

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IRS BSA Jurisdiction

• NBFIs include
• Money Services Businesses (MSBs)
• Casinos Tribal and Non-Tribal
• Some Credit Unions
• Entities subject to Section 352 of USA PATRIOT
  Act
• Insurance companies
• Dealers in precious metals, gems, jewels

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SB/SE Compliance BSA Structure

• 385 BSA examiners devote 100 of exam time to BSA
  cases
• Hiring 50 more BSA examiners in FY 2008

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Selection Process

• Leads from
• Use published services
• Internet research
• Analysis of Currency and Banking Retrieval System
  (CBRS) information
• Reliance on information received during exams
  competitor lists
• Information from FinCEN/IRS Criminal
  Investigation/TEGE/States

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Selection Process

• Methods to select BSA cases for examination
  changing
• Moving to more top-down approaches such as
• Examine MSB principals
• Examine principal agents

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Selection Process

• Testing a selection process that uses
  statistically valid risk factors
• Working with FinCEN and States to efficiently use
  exchanged MSB examination information

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BSA Examination Approach

• Risk analysis in a particular institution
• Risk of money laundering
• Risk of non-compliance
• Identify potential "High Risk" areas

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BSA Examination Procedure

• Identify the entitys AML risks and develop the
  examination scope and plan
• Assess effectiveness of the Anti-Money Laundering
  (AML) program
• Determine whether the AML program elements have
  been effectively implemented
• Assess whether breakdowns in the AML program
  place the institution at risk

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IRS BSA EXAM PROCEDURES

• Determine if compliance program is consistent
  with regulatory requirements
• Determine if compliance program is effective
• Assess effectiveness of AML policies and
  procedures
• Review internal controls
• Review independent review results

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IRS SB/SE BSA EXAM STEPS

• Preplan
• Initial Contact / Appointment
• Set Scope and Depth - Risk Analysis
• Evaluate Program, Policies, Procedures, and
  Internal Control
• Interview
• Determine Effectiveness of AML Program
• Limited Transactional Testing
• Closing the Examination

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DETERMINE IMPLEMENTATION

• In-depth interviews of personnel responsible for
  compliance with the BSA are key to confirming
  that the AML program has been effectively
  implemented.

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BSA TRANSACTIONAL TESTING

• Initially include the most current 3 month period
• Test the effectiveness of the AML program and
  determine if there are any weaknesses that impact
  compliance through transactional testing
• Transactional testing is on a sample basis

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Examination Outcomes
No Violations Letter 4029
(No Issue Letter) Technical, minor,
infrequent, Letter 1112 isolated, or
non-substantive (Violation letter) violations S
ignificant BSA Refer to FinCEN
for violation or deficiency penalty
/warning consideration Willful criminal
violation Refer to IRS Criminal
Investigation
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BSA Examinations
Through July 2007
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Contact Information

• Charlotte McGuffin
• BSA Technical Advisor
• 904-665-1264

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Questions / Comments