Compliance Issues and Trade Finance

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Compliance Issues and Trade Finance

• A Presentation for the Bankers Association for
  Finance and Trades 16th Annual Conference on
  International Trade

William J. Fox, Global AML Executive Bank of
America November 2, 2006
January 4th, 2005
January 4th, 2005
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Objectives

• Provide Background on key Fundamentals for BSA
  Program
• Identify the key risks posed by trade finance
• Identify ways to mitigate those risks
• Perspectives on Policy

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Current Landscape

• Prior to 9/11, compliance with the Bank Secrecy
  Act was viewed as a practical matter as a
  second tier responsibility for financial
  institutions.
• The 9/11 attacks a better understanding of the
  value of financial intelligence and the
  subsequent enactment of the USA PATRIOT Act
  (which significantly amended the Bank Secrecy
  Act) caused compliance with Bank Secrecy Act
  programs to be viewed by the government as an
  issue of national security.
• Since June 2004, several high-profile regulatory
  / criminal enforcement actions against financial
  institutions have been taken.
• Fear pervades current regulatory environment.
  Policy makers, regulatory agencies and industry
  all are fearful of missing a problem and then
  being held accountable.
• Important investigations by the Bureau of
  Immigration and Customs Enforcement (ICE) and the
  Drug Enforcement Administration (DEA) have
  highlighted risks posed by trade-based money
  laundering.

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Use of Financial Information

• Financial Information or Intelligence is
  critically important in the investigation of
  crime and the prevention of terrorism and
  official corruption
• Money doesnt lie
• Money leaves a footprint
• Money establishes previously unknown connections

Important Point to Remember Financial
Information is often used in the investigation
of crimes that are not financial in nature
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Fundamentals of BSA Compliance

• Appointing a BSA Officer that reports to the
  Board of Directors
• Having a comprehensive, risk-based anti-money
  laundering program approved by the Board
  that ensures the financial institution
• Appropriately identifies its customers (CIP
  Program)
• Knows its customers and the products its
  customers use
• Risk ranks its customers, the products they use
  and the geographies in which they use such
  products
• Develops appropriate risk-based internal controls
  to assure ongoing compliance with relevant
  recordkeeping and reporting requirements
• Conducting independent testing for compliance
• Developing a comprehensive training program and
  train appropriate personnel

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Trade-Based Money Laundering

• In December 2005, the Department of Treasury
  identified Trade-Based Money Laundering as a
  significant threat.
• Black Market Peso Exchange (BMPE)
• Over and Under Valuation
• False Documentation
• Foreign Trade Zones
• Trade in Certain Commodities Crude Oil,
  Precious Metals, Munitions, Nuclear Materials
• BSA Exam Manual
• Enhanced Customer Due Diligence
• Knowledge of Business Research and Verification
  of Activity
• Watching for High Risk Commodities and
  Jurisdictions

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AML and Trade Finance Policy Perspectives

• What, exactly, is the role of a financial
  institution
• What can institutions do what cant they do
• Greater Information Sharing with Government
• Restore the Partnership necessary for effective
  work in the AML space

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