In a recent survey conducted by the Risk Management Association to determine the biggest challenges faced by community banks, complying with the Bank Secrecy Act (BSA) was at the top of the list. This is especially relevant right now given the increased emphasis regulators are placing on compliance with the BSA.
Specifically, the BSA requires community banks to keep records of cash purchases of negotiable instruments and file reports of such purchases that exceed certain thresholds. Banks must file suspicious activity reports (or SARs) in a timely manner if they see anything that might indicate money laundering, tax evasion or other criminal activities by bank customers. According to OCC regulations, a SAR filing is required for any potential crimes:
- Involving insider abuse, regardless of the dollar amount;
- Where there is an identifiable suspect and the transaction involves $5,000 or more; and
- Where there is no identifiable suspect and the transaction involves $25,000 or more.
Note that unauthorized disclosure of a SAR is a federal criminal offense, and banks and bank employees face both civil and criminal penalties for failing to properly file SARs. These penalties may include large fines, regulatory restrictions, the loss of the banking charter, and even imprisonment.
While most large banks have invested in automated systems designed to detect suspicious activity in deposit accounts, few community banks can afford this technology. When combined with the current regulatory emphasis on BSA compliance, this makes it critical that community banks implement policies and procedures designed to make sure they remain in compliance with the BSA. According to OCC regulations, these procedures should:
- Provide for a system of internal controls to assure ongoing compliance.
- Provide for independent testing for compliance.
- Designate an individual responsible for coordinating and monitoring day-to-day compliance.
- Provide training for appropriate personnel.
Also, the Patriot Act now requires that community banks adopt a customer identification program as part of their BSA compliance program.
Got more questions about BSA compliance? Call us today.