CSBS BSA Forum: Regulatory Enforcement Trends

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CSBS BSA Forum Regulatory Enforcement Trends

• Debra Novak
• Chief
• Anti-Money Laundering Section
• FDIC, Washington, DC

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Overview

• Enforcement Action Trends
• Types of Enforcement Actions
• BSA/AML Examination Process

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BSA Enforcement Actions
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Types of Enforcement Actions

• Formal Actions
• Orders to Cease and Desist
• Civil Money Penalties
• Informal Actions
• Memorandum of Understanding
• Board Resolutions

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Citing Violations

• Three categories
• Ineffective program or program components
• Systemic and recurring noncompliance
• Isolated and technical noncompliance

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Program Violations

• Failure in overall program
• Failure in program components
• Internal controls
• Independent audit
• BSA Officer
• Training
• Customer Identification Program
• Violations of pillars may or may not lead to
  overall program violation
• Program violations typically supported by other
  violations showing noncompliance

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Systemic and Recurring

• Ineffective systems of controls, documentation,
  or reporting
• May be influenced by
• Pervasive nature of noncompliance
• Number of accounts/transactions affected
• Criticality of information unavailable or
  unrecorded
• Prominence of apparent violation throughout
  organization
• Program elements not providing effective reporting

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Isolated and Technical

• Limited instances of noncompliance
• Otherwise adequate policies, procedures, and
  controls
• Management willing and able to correct

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Interpretation of 8(s)

• CD Required for
• Failure to establish and maintain a BSA/AML
  program 326.8(b)(1)
• Failure to correct any problem previously
  reported 326.8(b)(2) or 326.8(c)(1-4)

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Repeat Violations for 8(s)

• Does not apply to technical violations, only
  pillar/component violations
• If FDIC joins state exam or enforcement action,
  then it is generally considered repeat
• Problem remains uncorrected same pillar citation
  may not mean same problem

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Enforcement Actions

• Must comply with 8(s) requirements for formal
  actions
• Does not have to be a recurring violation to
  implement formal action
• Recommend consistent application of formal and
  informal actions
• Apparent violations
• Money laundering risks