1. Leaders Credit Union Board Presentation
Bank Secrecy Act
April 2007

2. BANK SECRECY ACT Passed by Congress in 1970
Requires financial institutions to report information and keep records of certain monetary transactions
Referred to as an “Anti-Money Laundering” law
Designed to identify the source, volume, and movement of currency and other monetary instruments into or out of the U.S. or deposited into financial institutions
The BSA was put into place to safeguard the U.S. financial system from the abuses of financial crimes, including money laundering, terrorist financing, and other illicit financial transactions

3. BANK SECRECY ACT Money Laundering Control Act of 1986
Anti-Drug Abuse Act of 1986
Currency and Foreign Transactions Reporting Act
Financial Recordkeeping and the Department of Treasury’s Reporting of Currency and Foreign Transactions rules
USA Patriot Act, 2001

4. Source: Financial Crimes Enforcement Network (FinCEN)

5. BANK SECRECY ACT
12 USC 1818(s)(2) requires that the NCUA include a review of the BSA compliance program at each examination of a credit union. The NCUA may use their authority to enforce compliance with the BSA.
Regulatory agencies may take a range of actions in the event of a BSA violation
Criticism in examination report
Memorandum of Understanding
Cease and Desist order
Civil money penalties
Referral to Treasury

6. BANK SECRECY ACT Civil Penalties for Violations
Federal banking agencies and FinCEN, respectively, can bring civil money penalty actions for violations of the BSA. In addition, to criminal and civil money penalty actions taken against them, individuals may be removed pursuant to 12 USC 1818(e)(2) for a violation of the AML laws under Title 31 of the U.S. Code.

7. Significant Enforcement Actions
FinCEN issued two large civil money penalties in December 2006; Beach Bank in Miami, Florida for $800, and Foster Bank in Chicago, Illinois for $2,000, Violations included inadequate AML program, inadequate internal controls, failure to report suspicious activity, lack of independent testing, etc.
NCUA issued a “Cease and Desist Order” against the Dover N.J. Spanish American Federal Credit Union in February 2007 for substantial BSA compliance problems. ($15,000, with 4,000 members)

8. BANK SECRECY ACT
Money Laundering – filtering money from illegal activities through the financial system to conceal illegal sources of income
Laundered money may be deposited or withdrawn in a series of transactions to hide the illegal activity

9. BANK SECRECY ACT Terrorist Financing
Intended to intimidate through the threat of violence
Goal – to compel a government or organization to do something, or refrain from doing something that will result in furthering the terrorist’s agenda
Ideological motivation
Legitimate, as well as unlawful, sources

10. BANK SECRECY ACT Terrorist illegal activities include: Extortion
Kidnapping
Narcotics trafficking
Smuggling
Fraud schemes, such as identity theft

11. BANK SECRECY ACT Money Laundering Control Act of 1986:
Imposes criminal liability on a person or institution that knowingly assists in money laundering or who structures transactions to avoid reporting it
Financial Institutions must establish and maintain procedures designed to meet compliance guidelines according to BSA requirements

12. BANK SECRECY ACT Money Laundering Methods: Currency smuggling
Structured deposits or withdrawals from accounts
Purchases of various types of monetary instruments
Credit, debit or stored value cards
Funds transfers

13. BANK SECRECY ACT BSA reportable transactions include:
Deposits or withdrawals of more than $10,000 in cash in a day
Purchase of monetary instruments (money orders, cashiers checks, travelers cheques) with more than $3,000 in cash
If member inquires about how to do the transaction without being reported, LCU must file a “Suspicious Activity Report”

14. BANK SECRECY ACT LCU complies with BSA as outlined in Board policy
Cash transactions exceeding $10,000 will be reported on a Currency Transaction Report form FinCEN104
Suspicious Activity Reports are filed as required

15. BANK SECRECY ACT SUSPICIOUS ACTIVITY REPORTS
NCUA established thresholds for credit unions:
No threshold – If credit union is certain that an insider is connected with the known or suspected crime, reporting is required, regardless of the amount involved

16. BANK SECRECY ACT
$5,000 threshold – Credit union will report crimes of $5,000 or more if it knows the identity of the suspect or suspects the following:
Transaction involves money laundering
Transaction is designed to specifically evade the BSA
Transaction has no apparent lawful purpose or is not the sort of transaction in which the account holder usually engages, and the credit union can determine no reasonable explanation for the transaction

17. BANK SECRECY ACT
$25,000 threshold – The credit union must report all known or suspected crimes of $25,000 or more even if it does not know the identity of the suspect.
SAR reports are confidential. The member can NOT be told that a report has been filed.
Employees who are subpoenaed or requested to disclose a SAR must decline unless it is by FinCEN, an appropriate law enforcement agency, or supervisory agency
Disclosure of a SAR is a FELONY and could land the discloser in jail.

18. BANK SECRECY ACT LCU does not sell monetary instruments to non-members
LCU reviews a report daily, which tracks all transactions that require a Currency Transaction Report be filed when a member makes single or multiple deposits on the same business day equaling $10, or more.
The report also tracks transactions between $3,000 and $10,000 for tracking purposes of monetary instruments
Records are retained for all originated Wire Transfers
All records are retained for the required 5 year period

19. BANK SECRECY ACT
USA Patriot Act-Customer Identification Program (Board policy 10/1/2003)
Verify identity of any person seeking to open an account
Maintain records of documents used
Check for OFAC listing and SDN listing
ID Flag Verification through PAC

20. BANK SECRECY ACT Compliance Programs and Procedures
Internal controls, policies and procedures to assure ongoing compliance
Independent Audit
Designate a BSA Compliance Officer
Ongoing training for Staff and Board

21. Facilitated by Rita McCaslin, EVP
Bank Secrecy Act
Leaders Credit Union
Board Presentation
Facilitated by Rita McCaslin, EVP