Bank Secrecy Act:
Judy Graham, Program Officer
Office of Examination and Insurance
NCUA Update
March 19, 2013
Overview
• NCUA BSA Regulation
• Most Common violations
Bank Secrecy Act: NCUA Update 2
• Most Common violations
NCUA Regulation
• 12 C.F.R. 748.2 requires every federally insured credit union to
establish a BSA compliance program that :
– Establishes a system of Internal Controls to ensure ongoing
BSA compliance
– Provides for Independent Testing for BSA compliance by – Provides for Independent Testing for BSA compliance by
the credit union or outside party
– Designates a BSA Compliance Officer responsible for
monitoring day-to-day compliance
– Establishes a BSA Training program for appropriate
employees and volunteers
– Establishes a Customer Identification Program
Bank Secrecy Act: NCUA Update 3
Most common violations cited
�Training
�Not recent
�Not documented
�Doesn’t cover credit union’s policy & procedures
�No training for Board of Directors
Bank Secrecy Act: NCUA Update 4
Most common violations cited
• Independent Testing
�Not covering all credit union operations
�Not recent (12 to 18 months)
�Not independent
Bank Secrecy Act: NCUA Update 5
Most common violations cited
• Internal Controls
�Risk assessment not updated
�Suspicious Activity Monitoring System inadequate
Bank Secrecy Act: NCUA Update 6
Most common violations cited
• Data Quality Errors in CTR/SAR filings
• Incomplete forms
• Blank narrative on SARs
• E-filing of all BSA forms required as of July 1, 2012
• BSA e-file – www.fincen.gov
Bank Secrecy Act: NCUA Update 7
Most common violations cited
• Notification of SAR filings to BOD
�Not included in minutes
�The BOD should be aware of suspicious activity
�SAR information is extremely confidential – A
generalized report to BOD is sufficient
Bank Secrecy Act: NCUA Update 8
Most common violations cited
• Information Sharing (FinCEN 314(a) lists)
�Not checking the lists
�No documentation
• Self certification forms available
• Update point of contact – CU Online
Bank Secrecy Act: NCUA Update 9
Resources
• www.ncua.gov
– Regulations, Publications and reports
– Bank Secrecy Act
• www.fincen.gov
• www.ffiec.gov
Bank Secrecy Act: NCUA Update 10
Office Contact Page
Feel free to contact our office with questions or
comments.
Primary Staff: Judy Graham
Program Officer
Bank Secrecy Act: NCUA Update 11
Office Phone: 703-518-6392
Secondary Staff: [email protected]
Introduction Introduction –– Kent MarcumKent [email protected] (859) [email protected] (859) 341--57185718
� Graduate University of Kentucky� 28 Year Law Enforcement Veteran � IRS Criminal Investigation – Cincinnati (Retired)
– Complex Tax Fraud and Money Laundering Investigations• Organized Crime, Narcotics, Other Illegal Income• Expert Testimony in Switzerland• Expert Testimony in Switzerland• Worked with Scotland Yard and other Foreign Countries
� Training– Local, State, Federal, and Foreign Police Officers
� Current– Attorney– Financial Investigations Consultant– Kenton County Planning Commission– Resident of Kentucky
Gold SchemeGold Scheme
San San FranciscoFrancisco
New New YorkYorkWire TransferWire Transfer
Wire TransferWire TransferCustoms Customs
HouseHouse
GoldGoldGoldGold
JewelryJewelryStoreStore
GoldGold
MexicoMexico
BelgiumBelgium
GoldGold
GoldGoldWholesaleWholesale
HouseHouse
GoldGold
Federal StatutesFederal Statutes
Bank Secrecy Act
Money Laundering
Statutes - 14
Bank Secrecy Act RequirementsBank Secrecy Act Requirements
� CTR
� CTR-C
� CMIR
� FBAR
� MSB
� SAR
� 8300
Statutes - 15
Currency Transaction ReportCurrency Transaction Report
CTRCTR
� Requires financial institutions to report
– currency transactions
– aggregating over $10,000
– during one business day– during one business day
� Penalties
– 5 years / $250,000 fine
Statutes - 16
Reporting ProceduresReporting Procedures
� What to file
– Currency Transaction Report (CTR), FINCEN Form 104
CTR
� Where to file
– Filed with IRS, Detroit Computing Center
� When to file
– No later than 15 calendar daysafter transaction
15days
Statutes - 17
Transaction DefinedTransaction Defined
� Deposit, withdrawal, transfer or exchange of currency
� Loan or extension of credit� Loan or extension of credit
� Purchase or sale of stocks, bond, CD, monetary instrument
Statutes - 18
Financial InstitutionsFinancial Institutions
31 CFR 103.1131 CFR 103.11
� Banks
� Securities Brokers
� Currency Exchanger
� Issuer of Money Orders
� Transmitter of Funds
� Telegraph Company
� Check Cashing Services
� Casinos
� U.S. Postal Service
Statutes - 19
Bank Log Bank Log
31 CFR 532531 CFR 5325
• Institution may not issue nor sell the following in amounts of $3000 or more:
- Bank Checks - Cashier’s Checks
- Traveler’s Checks - Money Orders- Traveler’s Checks - Money Orders
Unless
- Is Account Holder at institution
- Furnishes ID needed to cash check
Statutes - 20
Other OptionsOther Options
� Exemption Lists– Unilateral Business Exemptions
– Exemptions requiring IRS OK– Exemptions requiring IRS OK
– Non-Exemptible
� Structuring (Smurfing)
� Geographical Targeting OrderStatutes - 21
QuizQuiz
Would a CTR be required IF:
Subject goes to a bank, withdraws Subject goes to a bank, withdraws $11,000 in currency from his bank account. He then goes to another bank and purchases a $5,000 and $6000 cashier’s check.
Statutes - 22
QuizQuiz
Would a CTR be required IF:
Subject goes to a bank and has $23,000 Subject goes to a bank and has $23,000 wire transferred directly from his account to an account in Ecuador.
Statutes - 23
CTRCTR--CC
� Requires casinos with annual revenue over $1 million to report
– currency transactions
– aggregating over $10,000– aggregating over $10,000
� Penalties
– 5 years / $250,000 fine
Statutes - 24
Reporting ProceduresReporting Procedures
� What to file
– Currency Transaction Report - Casinos(CTR-C), FINCEN Form 103
� Where to file
CTR-C
� Where to file
– Filed with IRS, Detroit Computing Center
– Nevada casinos file with the State of Nevada
� When to file
– No later than 15 calendar daysafter transaction
15days
Statutes - 25
Transaction DefinedTransaction Defined
� Deposit, withdrawal, transfer or exchange of currency
� Payments on credit line with currency� Payments on credit line with currency
� Purchase or redemption of casino chips for currency
Statutes - 26
QuizQuiz
Would a CTR-C be required to be filed with the federal government IF:
Subject purchases $10,500 in chips at a black jack table in Las Vegas with currency.
Statutes - 27
QuizQuiz
Would a CTR-C be required IF:
Subject takes $18,000 in chips to the Subject takes $18,000 in chips to the casino cage in Atlantic City and has the money wire transferred to Turkey.
Statutes - 28
Currency and Monetary Instrument ReportCurrency and Monetary Instrument Report
CMIRCMIR
� Requires individuals to report
– transport of currency & monetary instruments into or out of the US
– aggregating over $10,000– aggregating over $10,000
� Penalties
– 5 years / $250,000 fine
– Forfeiture
Statutes - 29
Reporting ProceduresReporting Procedures
� What to file
– FINCEN Form 105 (CMIR)
� Where to file
CMIR
� Where to file
– Filed with US Customs Service
� When to file
– At the time of entry intoor departure out ofthe United States Statutes - 30
QuizQuiz
Would a CMIR be required IF:
Subject carries $82,000 in currency Subject carries $82,000 in currency across the Canadian border in a suitcase.
Statutes - 31
QuizQuiz
Would a CMIR be required IF:
Subject mails $18,000 in currency of Subject mails $18,000 in currency of legitimate money to his brother in Paris for the purpose of investing in the French stock market.
Statutes - 32
QuizQuiz
Would a CMIR be required IF:
Subject has $26,000 in currency in his Subject has $26,000 in currency in his possession. He gives $9,000 to his friend, $9,000 to another friend, and keeps $8,000 on his person. Each of the individuals then walk separately across the Mexican border.
Statutes - 33
Foreign Bank Account ReportForeign Bank Account Report
FBARFBAR
� Requires individuals to report
– interest in foreign accounts
– aggregating over $10,000
– during a calendar year– during a calendar year
� Penalties
– 5 years / $250,000 fine
Statutes - 34
AggregationAggregation
� Requires aggregation of separate accounts for different countries
Switzerland Account 2,301
Denmark Account 1,007
Grand Cayman Account 7,500
Total Interest 10,808
Statutes - 35
Reporting ProceduresReporting Procedures
� What to file
– Form TD F 90-22.1
� Where to file
TD F
90-22.1
� Where to file
– Filed with IRS, Detroit Computing Center
� When to file
– No later than June 30 of thesucceeding calendar year
Jun
30
Statutes - 36
QuizQuiz
Would an FBAR be required IF:
Subject, who is a U.S. citizen, maintains Subject, who is a U.S. citizen, maintains three bank accounts in various foreign countries. In June of this year the balance in account A is $3,000,
the balance in account B is $5,000,
and the balance in account C is $8,000.
Statutes - 37
QuizQuiz
Would an FBAR be required IF:
Subject, who is a citizen of Mexico but Subject, who is a citizen of Mexico but makes frequent business trips to the U.S., has a secret bank account in the Cayman Islands with an average balance exceeding $100,000.
Statutes - 38
Suspicious Activity ReportSuspicious Activity Report
SARSAR
� Requires financial institutions to report
– transactions aggregating $5000 or more
– transactions involving potential violations of M/L laws and currency violationsM/L laws and currency violations
– if the institution believes the transaction is suspicious
� Penalties
– 5 years / $250,000 fine
Statutes - 39
Suspicious Activity Report (SAR)Suspicious Activity Report (SAR)
Financial Institutions:
� Banks
� Securities & Futures
Casinos & Card Clubs� Casinos & Card Clubs
� MSB
� More to follow !
Statutes - 40
Reporting ProceduresReporting Procedures
� What to file– Suspicious Activity Report -
Treasury Form
� Where to file
TD F
90-22.47
� Where to file– FinCEN, Detroit Computing Center
� When to file– No later than 30 calendar days after
initial detection30
days
Statutes - 41
QuizQuiz
Would an SAR be required IF:
Subject brings $17,000 in currency to his bank and attempts to deposit the money. bank and attempts to deposit the money. The teller informs him that a CTR will be filed. He deposits only $9,000 and returns the next day with the remaining $8,000 and purchases a cashiers check payable to a bank in Antigua.
Statutes - 42
QuizQuiz
Would an SAR be required IF:
Subject makes 3 to 4 deposits of currency each week, always in amounts ranging each week, always in amounts ranging from $5,000 to $9,700, into 2 different corporate accounts. The accounts appear to have no legitimate business activity and all the funds are periodically wire transferred to various Caribbean island accounts.
Statutes - 43
Form 8300Form 8300
� Requires trade or businesses to report
– receipt of over $10,000 in currency or monetary instrument
– aggregated over a 1 year period – aggregated over a 1 year period
� Penalties
– Failure to file
• 5 years / $250,000 fine
– Filing a false form
• 3 years / $250,000 fine
Statutes - 44
Cash DefinedCash Defined
� Currency
� Coin
� The following in amounts under � The following in amounts under $10,000:
• cashiers checks
• bank drafts
• travelers checks
• money orders
Statutes - 45
Reporting ProceduresReporting Procedures
� What to file– Form 8300
• Pre 2002 - Access to Form 8300 is generally restricted to IRS (See CD)
Where to file
8300
� Where to file– Filed with IRS, Detroit Computing Center
� When to file– No later than 15 calendar days after transaction
15days Statutes - 46
Trades & BusinessTrades & Business
� Jewelry Store
� Furniture
� Boat Sales
� Real Estate Brokers
� Construction Contractors
� Insurance Co.
� Aircraft Sales� Real Estate Brokers
� Auto Sales
� Travel Agencies
� Aircraft Sales
� Attorneys
� All other NFI’s
Statutes - 47
QuizQuiz
Would an 8300 be required IF:
A customer purchased a Corvette for $52,000. He gives the dealership an $8,000 currency He gives the dealership an $8,000 currency down payment in the morning, agrees to pay another $5,000 in a month, and finance the balance. He pays the dealership the $5,000 in currency exactly 33 days from the date of purchase.
Statutes - 48
QuizQuiz
Would an 8300 be required IF:
Subject purchases a new Master Craft ski boat. He gives the dealership $7,000 in currency on He gives the dealership $7,000 in currency on the day of the sale and signs a promissory note for the balance of $18,000 to be paid in 90 days. When the note comes due the subject writes a personal check to the dealership for $18,000.
Statutes - 49
Money Service BusinessMoney Service Business
� Requires MSB to file form TD F 90-22.55
– Due by 12/31/01 or within 180 days after the business begins operation
– Requires 2 year update by 12/31 of the second calendar yearcalendar year
– Filed with IRS Detroit Computing Center
– Maintain a list of agents and update annually
� Penalties
– 5 years / Fine
180days
Statutes - 50
Money Service BusinessMoney Service Business
�Money Transmitters
�Currency Dealers or Exchangers
�Check Cashing Services�Check Cashing Services
� Issuers, Sellers, or Redeemers of Traveler’s Checks, Money Orders, or Stored Value
Statutes - 51
Ancient Methods of Moving Money
Jerusalem Nazareth
Ancient Methods of Moving Money
BrokerBroker
How the Hawala System WorksHow the Hawala System Works
Worker Dealer
ForeignCurrency
U.S.Dollars
Foreign Dealer
Destroy Records
OverOver--invoicing Schemeinvoicing Scheme
$1 million Worth of Goods
$2 million Invoice for Goods
$2 million Wire Transfer
$2 million Invoice for Goods
Dealer A Dealer B
Hawala SchemeHawala Scheme
Clearing HouseDubai, UAE
Corresp.
Then toU.S.
Corresp.Bank
Dealer A Dealer B
Black Market Peso ExchangeBlack Market Peso Exchange
DrugDealer
PesoBroker Goods
“Legit”Biz Man
DrugDealer’s
Bank
PesoBroker
SmurfsSmurfs
1. Large, conspicuousamount of cash
3. Money is again divided
into several bank accounts
4. Money wired from
small bank accounts
to one accountat a larger bank2. Large amount is
divided intosmaller amounts
Black Market Peso ExchangeBlack Market Peso Exchange
DrugDealer Goods
PesoBroker
ML International 10/27/98Mar-03
PesoBroker
“Legit”Biz Man
DrugDealer’s
Bank
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