Thursday, August 21, 2014
Written by
FinCen Updates Customer Due Diligence Requirements

Modern entertainment, whether it be books or movies,  oftentimes grapple with the issues of “who are you?” As a story line develops the audience is kept guessing as characters turn out to have different motivations or identities than what they were first perceived to have. Political thrillers oftentimes involve agents of shadowy groups behind which the true masterminds operate. How much effort will it take to reach the truth? FinCEN has recently come out with some proposed guidance that addresses this issue in the context of the legal entities that financial institutions do business with.

In a proposed rulemaking published in late July, FinCEN proposed a new regulatory requirement to identify beneficial owners of legal entity customers. Going forward, the essential elements of customer due diligence will include: (i) identifying and verifying the identity of customers; (ii) identifying and verifying the identity of beneficial owners of legal entity customers (i.e., the natural persons who own or control legal entities); (iii) understanding the nature and purpose of customer relationships; and (iv) conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions.

The first element is already something which financial institutions address as part of their customer identification program (“CIP”). The second element is the subject of the proposed rulemaking. In order to identify the beneficial owner, a covered financial institution must obtain a certification from the individual opening the account on behalf of the legal entity customer (at the time of account opening). The certification form  requires the individual opening the account on behalf of a legal entity customer to identify the beneficial owner(s) of the legal entity customer by providing the beneficial owner’s name, date of birth, address and social security number (for U.S. persons). Significantly, the rule also requires financial institutions to verify the identity of the individuals identified as beneficial owners on the certification form. The procedures for verification are to be identical to the procedures applicable to an individual opening an account under the existing CIP rules.

The proposed definition of “beneficial owner” includes two independent prongs: an ownership prong (clause (1)) and a control prong (clause (2)). A covered financial institution must identify each individual under the ownership prong (i.e., each individual who owns 25 percent or more of the equity interests), in addition to one individual for the control prong (i.e., any individual with significant managerial control). If no individual owns 25 percent or more of the equity interests, then the financial institution may identify a beneficial owner under the control prong only. If appropriate, the same individual(s) may be identified under both criteria.

(more…)

Wednesday, April 17, 2013
Written by

Bryan Cave is hosting the CPE and general membership meeting for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Thursday, April 25 2013, from 2:00pm to 4:00pm. The event’s presentation is “Digital Currencies, Third Party Payment Processing, Oh My!” featuring Anthony Gallippi, co-founder and CEO of BitPay.

All AML/CTF professionals in the region are welcome to attend.

June 7, 2012
2:00 PM – 4:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

Parking is available at 14th Street and West Peachtree St.
$4 cash and cards accepted

Free for Chapter Members; $20 for Non-Chapter Members

RSVP Here

Bitcoin and other digital currencies are gaining traction in the marketplace against traditional fiat and specie currencies.  Current economic conditions have led many average citizens to exploring potential ways to secure earnings from government devaluation.  Criminals continue exploring ways to launder proceeds while reducing risk of detection.  And businesses cry out for less expensive means of receiving payments which are less susceptible to fraud.  Learn the facts about the history, growth and benefits of bitcoin.  Explore potential risks involved in accepting and using bitcoin and/or in providing financial services to those that do.  Learn too about bitcoin payment processing pioneer BitPay, its take on the future of digital currencies and payment processing, and FinCEN’s recent Guidance on Virtual Currencies and Regulatory Responsibilities.

(more…)

Monday, December 17, 2012

The FDIC recently released a consent order with Meridian Bank (Paoli, Penn.) which dealt largely with the bank’s oversight and management of its electronic payment program and third-party payment processors (TPPPs), as well as BSA/AML issues. Although this order is tailored by the FDIC to address specific issues found at the bank and focuses on merchant transaction processing, a review of the requirements outlined in the order may be useful for banks and other financial services companies that deal with third-party providers or high-risk customers.

The order includes a lengthy and detailed list of the steps the bank must take regarding its oversight and management of third parties involved in the bank’s electronic payments program, including the following:

(more…)

Friday, November 30, 2012

Hot on the heels of FinCEN’s advisory on risks associated with third-party payment processors (see Government Update, issue 18), FinCEN and the FDIC assessed concurrent $15 million civil money penalties against First Bank of Delaware for violations of BSA/AML laws and regulations. Among other things, FinCEN and the FDIC found that the bank “failed to adequately oversee third-party payment processor relationships and related products and services commensurate with associated risks.”

The bank also settled related civil claims with the DOJ, which alleged it “established direct relationships with several fraudulent merchants and third-party payment processors working in cahoots with a large number of additional fraudulent merchants.” On behalf of those entities, the DOJ alleged, the bank originated hundreds of thousands of debit transactions against consumers’ bank accounts, many of which originated via remotely created checks (RCCs). The DOJ also alleged that the bank was aware of “significant red flags warning the bank that the debit transactions were tainted by fraud.” The DOJ’s $15 million penalty is concurrent with those of FinCEN and the FDIC. The bank also is required to maintain an account with $500,000 to pay consumer claims arising from its alleged conduct.  (more…)

Sunday, June 3, 2012
Written by

Bryan Cave is hosting the quarterly CPE and general membership meeting for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Thursday, June 7, 2012, from 2:00pm to 4:00pm, with registration starting at 1:30pm. The event’s presentation is “Look Backs: The Good, The Bad and The Ugly” featuring Craig Stone and Donna DeMartino with Alvarez & Marsal.

All AML/CTF professionals in the region are welcome to attend.

June 7, 2012
2:00 PM – 4:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

Parking is available at 14th Street and West Peachtree St.
$4 cash and cards accepted

Free for Chapter Members; $20 for Non-Chapter Members

RSVP Here

The overall presentation will focus on several key factors associated with a BSA/AML look back relative to various activities that are required to take place especially when the financial institution has not foreseen the risks associated with payment processors; for example: unauthorized returns, high number of charge backs and customer complaints, higher rates of remote check capture, ACH debits as unauthorized and/or due to insufficient funds.

(more…)

Monday, March 5, 2012
Written by

Bryan Cave is hosting the quarterly CPE and general membership meeting for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Thursday, March 15, 2012, from 2:00pm to 4:00pm. The event’s presentation is “Best Practices for BSA/AML Software Testing,” featuring Allan Cuttle, Director of Risk Management for ICS Risk Advisors.

All AML/CTF professionals in the region are welcome to attend.

March 15, 2012
2:00 PM – 4:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

Parking is available at 14th Street and West Peachtree St.
$4 cash and cards accepted

Free for Chapter Members; $20 for Non-Chapter Members

RSVP Here

This event will include tips on pre and post software implementation issues, pitfalls, best practices, regulatory environment and expectations, along with testimonials on the value of this process to effective risk management.

(more…)

Friday, February 24, 2012
Written by

Ten years ago, Bank Secrecy Act (BSA)/anti-money laundering (AML) compliance was one of the biggest areas of concern for banks and their regulators.  Following September 11 and the heightened regulatory focus on BSA matters, most banks found it necessary to expend significant resources to enhance or even rebuild their BSA/AML programs.

In the past few years, bank regulators have had to focus on other matters, including residential and commercial loan concentrations, adequate capitalization, and even bank failures.  Banks also wisely have focused on these matters during these difficult economic times.

It is important, however, that these other matters do not push BSA/AML compliance aside.  This article summarizes some of the top BSA-related issues that the Board of Directors of every bank should keep in mind.

Best Practices for the Board

It is easy in difficult financial times for the Board and management to push aside compliance matters, including BSA/AML compliance.  Compliance matters can seem less important when one is worried about the bank’s very survival.

Nevertheless, compliance continues to be important.  It is critical that the Board stay informed, devote adequate resources to compliance, and set the proper tone for compliance within the organization.

The following are four best practices for Boards of Directors.

1.     Require Periodic and Thorough BSA Reports

One of the most important things for the Board to understand about the BSA and AML requirements is that the Board is expected to stay abreast of the institution’s progress and what is working and not working.  That means that the Board needs to receive at least annual BSA/AML training, and also needs to receive regular reports on BSA/AML compliance matters from its BSA officer, including on suspicious activity report (SAR) filings and trends.

(more…)

Tuesday, October 11, 2011
Written by

Bryan Cave is hosting the quarterly CPE and general membership meeting for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Thursday, November 3, 2011, from 10:00am to 12:00pm.  We are also very pleased to announce that our own Judie Rinearson will be the guest speaker.

All AML/CTF professionals in the region are welcome to attend.

November 3, 2011
10:00 AM – 12:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

Free for Chapter Members; $5 for Non-Chapter Members

RSVP Here

Judith Rinearson leads the payments practice team for Bryan Cave LLP, where she is a partner in the firm’s New York City office. She also is chair of the Network Branded Prepaid Card Association’s Government Relations Working Group, the association’s representative to FinCEN’s Bank Secrecy Act Advisory Group and a Paybefore contributing editor.

Tuesday, August 2, 2011
Written by

Bryan Cave is hosting the kick-off event for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Monday, August 22nd, from 2:00pm to 4:00pm.  All AML/CTF professionals in the region are welcome to attend, and the event is open and complimentary to all.

August 22, 2011 ׀ 2:00 PM – 4:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

RSVP Here

(more…)

Tuesday, October 20, 2009
Written by

FinCEN has announced a new outreach effort targeted at depository institutions under $5 billion in total assets to determine how these institutions comply with the Bank Secrecy Act and the specific compliance hurdles they confront.   If your institution has assets under $5 billion, please see our client alert about FinCEN’s outreach proposal.

As part of its ongoing outreach efforts, FinCEN is now seeking to engage smaller to moderate size depository institutions who are working to implement the four pillars of the Bank Secrecy Act regulatory regime: (1) policies, procedures and internal controls; (2) designation of a compliance officer; (3) ongoing training; and (4) independent testing.