Documentary Letters of Credit and Compliance

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Volatility - The New Norm?

• Documentary Letters of Credit and Compliance
• Moderator Dan Taylor, IFSA
• John W. Campbell, PricewaterhouseCoopers LLP
• N. Michael Boriboon, U.S. Department of the
  Treasury
• Timothy P. Leary, Board of Governors of the
  Federal Reserve

Bankers Association for Finance and Trade
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Bankers Association for Finance and Trade
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Bankers Association for Finance and Trade
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Regulatory Expectations

• To institute risk-based policies, procedures, and
  processes to manage the risks associated with
  trade finance activities and to implement
  effective due diligence, monitoring, and
  reporting systems (see 2007 FFIEC BSA/AML
  Examination Manual, p. 247).

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Examination Focus

• Policies, procedures and processes
• Due diligence information
• Management information systems and internal risk
  rating factors
• SAR monitoring
• OFAC

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Key Knowledge Factors

• Products
• Clients/Customers
• Locations
• Processes

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Key Knowledge Sources

• Risk assessment
• Policies, procedures, and processes
• Due diligence information
• Interviews
• Observations

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FFIEC BSA/AML Examination Manual 2007 Revisions

• Feedback from industry
• BSAAG Examination Subcommittee
• ABA, BAFT, and IFSA
• Feedback from examiners
• FATF Trade-Based Money Laundering (June 23,
  2006)

Bankers Association for Finance and Trade
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FFIEC BSA/AML Examination Manual 2007 Revisions

• Enhanced discussion of various roles banks can
  play in the trade finance process (p. 241)
• Recognized that due diligence will vary depending
  on the role the bank plays The banks in the
  letter of credit process need to undertake
  varying degrees of due diligence depending on
  their role in the transaction. (p. 243)
• Added reference to the FATF guidance (p. 243)

Bankers Association for Finance and Trade
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FFIEC BSA/AML Examination Manual 2007 Revision

• To the extent feasible . . . (p. 243)
• Reliable documentation is critical in
  identifying potentially suspicious activity. (p.
  243)
• Added reference to specific import or export
  forms the bank may want to consider reviewing
  (e.g., entry summary form, shippers export
  declaration form) (p. 243)

Bankers Association for Finance and Trade
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FFIEC BSA/AML Examination Manual 2007 Revisions

• Enhanced list of factors that a bank may want to
  give greater scrutiny (p. 244-45)
• Corresponding changes to Appendix F (Red Flags)
  (p. F-5)
• The big 3
• Obvious over- or under-pricing example gone
• Transactions designed to evade legal restrictions
  gone
• Excessively to Significantly

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Contact Information

• Timothy P. Leary
• Board of Governors of the Federal Reserve System
• [phone]
• Timothy.P.Leary_at_frb.gov
• www.frb.gov
• Infobase www.ffiec.gov/bsa_aml_infobase/default.
  htm

Bankers Association for Finance and Trade