AML Compliance in 2006

1
AML Compliance in 2006

• Advancing Global Trade and Investment
• Bankers Association for Finance and Trade84th
  Annual MeetingApril 10, 2006
• Carol R. Van Cleef

2
Overview

• New BSA/AML Examination Manual
• New Paradigm
• Trade Financing
• Final Section 312 Regulations
• Special Measures
• OFAC Compliance

3
Overview

• Cross Border Transactions
• Stored Value/Prepaid Cards
• Shell Companies
• Regulatory Enforcement Actions
• FinCEN
• Law Enforcement

4
The Bank Secrecy Act/Anti-Money Laundering
Examination Manual

• June 30, 2005
• Compilation of pre-existing materials Nothing
  new
• Revisions already underway
• Trade financing
• ACHs

5
The New Paradigm

• Risk assessment
• Customer due diligence
• Suspicious activity monitoring
• Transaction testing
• Enterprise-wide compliance

6
Customer Due Diligence

• Minimum CDD (Not Just CIP)
• Correspondent accounts
• Private banking
• All other customers (?)
• Enhanced Due Diligence
• Certain foreign bank correspondent accounts
• Senior foreign political persons (PEPs)
• Money services businesses
• Charities/NGOs
• Shell companies
• Other high risk customers

7
High Risk Products/Services

• Trade Financing
• Concentration Accounts
• Electronic Payments Services
• Funds transfers
• Electronic cash

8
Suspicious ActivityMonitoring

• Adequate and effective
• All areas of the enterprise
• Information
• Internal
• External
• Personnel
• Experience
• Time
• Resources
• Training
• Technology

9
Transaction Testing

• Risk-based
• Independent audit
• Examiners
• High risk customers
• High risk products

10
Enterprise-Wide Compliance

• Parent company or principal subsidiary
• Up, down and across
• Local law
• SARs sharing

11
Correspondent Accounts

• Final regulations effective July 5, 2006
• Policies Procedures and Controls
• Appropriate, specific, risk based, where
  necessary, enhanced
• Reasonably designed
• Detect and report on an ongoing basis
• Known or suspected money laundering
• Determine whether account is subject to enhanced
  due diligence
• Part of AML program

12
Definitions

• Correspondent Account
• Account
• Covered Financial Institution
• Foreign Financial Institution
• Owner
• Physical Presence
• Regulated Affiliate

13
Correspondent Accounts

• Assess risk based on
• Nature of business and markets it serves
• Type, purpose, anticipated account activity
• Nature and duration of relationship
• AML and supervisory regime of chartering/licensing
  and owners jurisdiction
• Known or reasonably available information on AML
  record
• Apply risk based procedures and controls
• No or incomplete due diligence
• Refuse to open
• File a SAR
• Close the account

14
Enhanced Due Diligence

• Proposed for certain foreign banks
• Obtain and review AML program documentation
• Determine if program appears to be reasonably
  designed
• Monitor transactions to, from, through
• Identify persons with authority to direct
  transactions (PTA)
• Identify sources of funds and beneficial owners
  (PTA)
• Determine if any nested accounts
• Identify owners if not publicly traded

15
Private Banking

• Minimum due diligence standards for private
  banking accounts
• Asset accounts requiring 1 million minimum
  deposit
• Administered by single individual
• Enhanced scrutiny of senior foreign political
  officials
• To detect proceeds of foreign corruption
• PEPs Include
• Immediate family members
• Close associates

16
Private Banking

• Minimum Reasonable Steps
• Identify nominal and beneficial owners
• Determine whether a PEP
• Identify sources of funds and purpose and
  expected use
• Review account activity review

17
Senior Foreign Political Figures (PEPs)

• Enhanced scrutiny of account
• Proceeds of foreign corruption
• Misappropriation
• Theft
• Embezzlement
• Unlawful conversion
• Bribery or extortion
• Procedures when due diligence cannot be performed

18
Special Measures

• Proposed
• Final
• Banco Delta Asia SARL

19
OFAC Compliance

• New examination procedures
• Risk assessment
• New enforcement approach and procedures
• ACH transactions

20
Cross Border Transactions

• Study required by Congress
• Survey being conducted by US Treasury
• Reporting of information already collected
• Coverage

21
Regulatory Initiatives

• Stored value/prepaid cards
• Shell companies
• Money services businesses
• Section 352 regulations for other industries

22
Enforcement

• Global
• Greater regulatory coordination
• Enterprise wide expectations
• Higher fines
• Individuals targeted
• High risk activities (dollar clearing and illegal
  MSBs)
• Systematic AML program violations
• Incomplete, inadequate, late or no SARs
• Unsafe and unsound practices
• Low hanging fruit

23
OUTLOOK

• Heightened BSA/AML compliance expectations for
  foreseeable future
• Terrorism is not waning
• Focus on terrorist financing will intensify
• Law enforcement gets smarter each day
• Crooks get smarter each day
• Technology continues to improve
• Remembering your audience

24
CONTACT

• Carol R. Van Cleef
• Partner
• Bryan Cave LLP
• 700 Thirteenth Street, NW
• Washington, D.C. 20005
• 202-508-6112
• Carol.Vancleef_at_bryancave.com