For those of you heavily involved with BSA/AML compliance at your financial institution, you may feel like the new Beneficial Ownership rule is all you have been focusing on. Compliance with the new rule is critical as it is adding a fifth pillar to your institution's BSA Program. You need to be considering updating your policy and risk assessment, adding new procedures and creating a process for identifying and verifying beneficial owners of a legal entity customer. Focusing on this upcoming effective date of the new rule is important, but there are additional items to consider when it comes to maintaining compliance with BSA in 2018 as well.
First, there have been some changes to the CTR form. The changes include the following:
- Part I Person Involved in Transaction: Renamed Item 2d from "Courier Service (private)" to "Common carrier"
- Part II Amount and Type of Transaction: Added a checkbox to Item 24 to reflect "Shared Branching"
- Part III Transaction Location: Added an Unknown option to Item 29, Primary Federal Regulator, Added an Unknown checkbox to Item 32, EIN, Added Item 37, Country, Added Item 41, Cash in amount for transaction location and Added Item 42, Cash out amount for transaction location
- Part IV Filing Institution Contact Information:Added new Part IV "Filing Institution Contact Information" section to collect data about the institution that filed the CTR
In addition, FinCEN has changed the requirement for the type of file format that the CTR form will be accepted in through their e-filing system. By May 2018, all CTRs for batch filers must be uploaded in XML based file. The BSA E-filing system will continue to accept ASCII based batch files, but only until May 2018.
Secondly, FinCEN has also recently updated the BSA FAQs that can be found on their website. The FAQs were updated to address a recent issue involving the Designation of Exempt Person (DOEP) form. As a result, question number 16 was modified. In addition, there were several outdated questions and old references that were updated.
Another consideration for your financial institutions BSA Program is the participation in FinCEN's recent project, which included the launching of "FinCEN Exchange." On December 4, 2017 FinCEN announced the launch of a new program to enhance information sharing with financial institutions. This program includes a coordination between law enforcement, FinCEN, and financial institutions to exchange information on priority illicit finance threats. The participation in FinCEN Exchange is completely voluntary by the private sector, however it is encouraged as it helps Treasury meet their objective to strengthen the anti-money laundering framework.
FinCEN Exchange will include regularly scheduled briefings across the nation with law enforcement and will be based on obtaining information related to illicit finance and national security threats. The briefings will result from consultations between law enforcement and FinCEN and will invite financial institutions to participate based on whether they may have relevant information that law enforcement is wanting to obtain. They may vary on the information requesting to be shared, through 314(a) requests or other authorities. FinCEN encourages involvement in the Exchange as it suggests that it may help institutions be better equipped to incorporate responsive information into SARs. In addition, they also suggest financial institutions voluntarily share information with other FinCEN Exchange participants and those institutions that participate in 314(b) Information Sharing.
To add some excitement to the mix, the Department of Justice recently issued a memo regarding the enforcement of federal marijuana policy. Here is another element to consider in your institutions BSA Program. The memorandum encouraged all U.S. Attorneys to prosecute for marijuana related activities. The memo also addressed the return of the Controlled Substance Act, which prohibits the cultivation, distribution and possession of marijuana, all of which are activities that can lead to crimes related to money laundering and BSA. Although the Cole Memo has been rescinded, there has been no further guidance from FinCEN addressing the impact on your institution's SAR filing or the banking of a Marijuana Related Business (MRB). Without further guidance from FinCEN, you should continue filing SARs as instructed on MRBs. However, you may want to consider how this will impact your institution's BSA Program if you currently bank MRBs.
Lastly, as I discussed earlier, is the upcoming effective date of the new Beneficial Ownership rule on May 11, 2018. By now you should be considering the updates to your institution's BSA Policy and Risk Assessment. You will want to make sure the updated BSA Program is board approved prior to May 2018. In addition, you will want to consider the updates to current procedures and even creating new procedures to implement the identification and verification of beneficial owners. As institutions are working toward implementing a compliant program, there remains a need for clarification on areas addressed in the new rule that suggest procedures should be "risk-based." FinCEN recently indicated they recognized the need for clarification by stating that they may be releasing additional guidance with a release of updated FAQs on the new rule. In addition, the regulators are updating the FFIEC Exam Manual to address the new rule. Although focus on compliance with the new rule is critical, don't overlook additional updates as it relates to compliance with BSA and the impact on your institution's BSA Program.
As we wrap up the first month of 2018, it seems as though we can already expect a busy year in regards to compliance with BSA. If you are wanting to learn more about compliance with the new Beneficial Ownership rule or compliance requirements for your institutions BSA Program, consider attending the 2018 Temenos Educational Conference. We will address topics such as CTR and SAR filing scenarios. In addition, we will cover the new Beneficial Ownership rule including regulatory requirements and successful implementation into your current BSA Program.