BSA/AML Examiner School eBook

BSA/AML Examiner School

April 15-19, 2024 San Diego, CA

@ www.csbs.org ♦ @csbsnews

CONFERENCE OF STATE BANK SUPERVISORS 1300 I Street NW / Suite 700 / Washington, DC 20005 / (202) 296-2840

BSA/AML Examiner School San Diego, California April 15 - 19, 2024

DoubleTree by Hilton San Diego – Mission Valley

Monday, April 15, 2024 7:30 AM

Registration and Breakfast

Opening Remarks and Course Discussion Instructors & CSBS Staff

8:30 AM

Review of Pre-Course Material Jaunita Koerner

9:00 AM

Case Study Introduction Jaunita Koerner

10:00 AM

Break

10:15 AM

BSA Exam Planning (Risk Assessment, Exam Manual, FinCEN Database) Instructors

10:30 AM

Lunch

11:45 AM

BSA Exam Planning Continued Instructors

1:00 PM

Break

2:30 PM

BSA Examination Planning Continued Instructors

2:45 PM

Wrap-Up Session Instructors

4:00 PM

Adjourn

4:30 PM

Reception

5:30 – 7:30 PM

Tuesday, April 16, 2024 7:30 AM

Breakfast

Prior Day Review Instructors

8:30 AM

BSA Officer Initial Interview Instructors

9:00 AM

Break

10:15 AM

Core BSA Exam Procedures Instructors

10:30 AM

Lunch

11:45 AM

Core BSA Exam Procedures Continued Instructors

1:00 PM

Break

2:15 PM

Core BSA Exam Procedures Continued Instructors

2:30 PM

Wrap-Up Session Instructors

4:00 PM

Adjourn

4:30 PM

Wednesday, April 17, 2024 7:30 AM

Breakfast

Prior Day Review Instructors

8:30 AM

Core BSA Exam Procedures Continued Instructors

9:00 AM

Break

10:15 AM

Core BSA Exam Procedures Continued Instructors

10:30 AM

Lunch

11:45 AM

Core BSA Exam Procedures Continued Instructors

1:00 PM

Break

2:15 PM

Money Transmitters & Prepaid Access Cards Tom McVey

2:30 PM

Wrap-Up Session Instructors

4:00 PM

Adjourn

4:30 PM

Thursday, April 18, 2024 7:30 AM

Breakfast

Prior Day Review Instructors

8:30 AM

BSA Examination Results Sandra Khatchadourian

9:00 AM

Break

10:15 AM

BSA Officer Meeting Preparation Instructors

10:30 AM

Lunch

11:45 AM

BSA Officer Meetings Instructors

1:00 PM

Break

2:30 PM

Case Study – Exam Results

2:45 PM

Law Enforcement Speaker TBD

3:00 PM

Adjourn

4:30 PM

Friday, April 19, 2024 7:30 AM

Breakfast

Assessment of Learning Objectives Instructors

8:30 AM

Emerging Issues Instructors

9:00 AM

Break

10:30 AM

Wrap-Up Session Instructors

10:45 AM

Adjourn

11:00 AM

April 15-19, 2024 BSA/AML Examiner School San Diego, CA

ATTENDEES California Department of Financial Protection and Innovation Avedian, Arman

arman.avedian@dfpi.ca.gov

Chen, Si

si.chen@dfpi.ca.gov

Juricich, Gregory

gregory.juricich@dfpi.ca.gov

Le, Thu

thu.le@dfpi.ca.gov

Leung, Laura

laura.leung@dfpi.ca.gov

Mathauda, Jaspreet Mudavanhu, Tanaka

jaspreet.mathauda@dfpi.ca.gov tanaka.mudavanhu@dfpi.ca.gov robert.pineschi@dfpi.ca.gov

Pineschi, Robert

Song, Eileen

eileen.song@dfpi.ca.gov

Delaware Office of the State Bank Commissioner Ephraim, Keiasha

keiasha.ephraim@delaware.gov matthewk.knight@delaware.gov justin.laznik@delaware.gov jessica.thomas@delaware.gov

Knight, Matthew Laznik, Justin Thomas, Jessica

Idaho Department of Finance Ware, Thomas

thomas.ware@finance.idaho.gov

Michigan Department of Insurance and Financial Services Hinkle, Steven Mississippi Department of Banking & Consumer Finance Greenwood, Krista

hinkles@michigan.gov

krista.greenwood@dbcf.ms.gov

New York State Department of Financial Services Aarons, Whilel

whilel.aarons@dfs.ny.gov weiwen.huang@dfs.ny.gov tiffany.israel@dfs.ny.gov benson.martin@dfs.ny.gov

Huang, Weiwen Israel, Tiffany Martin, Benson

South Dakota Division of Banking Heckenlaible, Jordan

jordan.heckenlaible@state.sd.us matt.schlosser@state.sd.us matthew.wester@state.sd.us

Schlosser, Matt Wester, Matthew

Wisconsin Department of Financial Institutions McCaigue, Lawrence

larry.mccaigue@dfi.wisconsin.gov

INSTRUCTORS California Department of Financial Protection and Innovation

Khatchadourian, Sandra

sandra.khatchadourian@dfpi.ca.gov

Nebraska Department of Banking and Finance Koerner, Jaunita

jaunita.koerner@nebraska.gov

U.S. Department of Homeland Security Hutt, Robert

robert.hutt@ice.dhs.gov

West Virginia Division of Financial Institutions McVey, Tom

tmcvey@wvdob.org

CSBS STAFF Hoyle, Katie Lang, Julia

khoyle@csbs.org jlang@csbs.org

Richardson, Amy

arichardson@csbs.org

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BSA/AML Examiner School Introduction

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Introductions

NAME

STATE AGENCY

YEARS OF EXAMINATION EXPERIENCE & WITH BSA

FUN FACT ABOUT YOU

SOMETHING YOU HOPE TO LEARN DURING THIS CLASS

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Instructor Contact Information

Senior Financial Institutions Examiner California Department of Financial Protection & Innovation sandra.khatchadourian@dfpi.ca.gov Sandra Khatchadourian

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Instructor Contact Information

BSA Examiner Specialist Nebraska Department of Banking & Finance Jaunita.Koerner@nebraska.gov Jaunita Koerner

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Instructor Contact Information

Senior Examiner West Virginia Division of Financial Institutions TMcVey@wvdob.org Tom McVey

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Go to www.kahoot.it and enter Game PIN provided

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Questions

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BSA/AML Examiner School Exam Manual

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Session Learning Objectives: 1. Utilize the Bank Secrecy Act/ Anti-Money Laundering Examination Manual

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Presentation

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August 2023 Updates

1. Special Information Sharing Procedures to Deter Money Laundering and Terrorist Activity (Updated and Retitled) 2. Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions (Updated and Combined) 3. Due Diligence Programs for Private Banking Accounts (Updated and Combined) 4. Prohibition on Correspondent Accounts for Foreign Shell Banks. for Service of Legal Process (New) 5. Summon or Subpoena of Foreign Bank Records; Termination of Correspondent Relationship; Records

Records Concerning Owners of Foreign Banks and Agents

Concerning Owners of Process (New) 6. Reporting Obligations on Foreign Bank Relationships

Foreign Banks and Agents of the Legal

with Iranian-Linked Financial

Institutions (New)

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Check-in Question

True or False: The FFIEC BSA/AML examination manual is updated at least quarterly.

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FFIEC BSA/AML Examination Manual

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Introduction

• Bank Secrecy Act of 1970 (aka Bank Records and Foreign Transaction Act)

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Introduction

• Money Laundering Control Act of 1986

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Introduction

• Annunzio-Wylie Anti Money Laundering Act (1992)

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Introduction

• USA PATRIOT Act (2001)

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Introduction

• AML Act 2020* - Aims to improve: • Laws relating to ML • Beneficial ownership reporting

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Check-in Question

True or False: FinCEN was created in relation to the Money Laundering Control Act of 1986.

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Compliance Program Section

1. Scoping and Planning 2. Risk Assessment 3. Assessing the Compliance Program 4. Developing Conclusions and Finalizing the Exam

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Compliance Program Section

1. Scoping and Planning 2. Risk Assessment 3. Assessing the Compliance Program 4. Developing Conclusions and Finalizing the Exam

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Compliance Program Section

1. Scoping and Planning 2. Risk Assessment 3. Assessing the Compliance Program 4. Developing Conclusions and Finalizing the Exam

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Compliance Program Section

1. Scoping and Planning 2. Risk Assessment 3. Assessing the Compliance Program 4. Developing Conclusions and Finalizing the Exam

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Check-in Question

True or False: The Scoping and Planning section of the manual is an important step in determining what items will be scoped in or out of an examination.

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Other Sections of the Manual

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Regulatory Requirements

• Assessing Compliance with BSA Regulatory Requirements

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OFAC

• Office of Foreign

Assets Control (OFAC)

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Program Structures

1. BSA/AML Compliance Program Structures 2. Foreign Branches and Offices of U.S. banks 3. Parallel Banking

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Regulatory Requirements (Other Risks)

• Risks Associated with Money Laundering & Terrorist Financing

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Appendices

• Appendix 1 • Appendix A • Appendix C • Appendix D

• Appendix E • Appendix F • Appendix J & M • Appendix Q

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FFIEC BSA/AML InfoBase https://bsaaml.ffiec.gov

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Examination Manual Exercise Go to www.menti.com and use the code provided

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Questions

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BSA/AML Examiner School Risk Assessment

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Session Learning Objective: Discuss risk assessment and its role in BSA/AML compliance

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Presentation

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Appendix I: Risk Assessment Link to the BSA/AML Compliance Program

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Risk Assessment Development: 1. Identify risk categories 2. Analyze risk categories

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Identification of risk categories: • Products & services • Customers • Geographic locations • Other areas • Size & complexity of the institution

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Product & service risk:

• Funds transfers • Prepaid access

• Electronic banking • Non-customer sales

• Private banking • Pouch activities

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Customer base risk: • Money Service Businesses (MSBs) • Cash-intensive • Non-governmental organizations (NGOs) • Private ATMs

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Geographic risk: • High Intensity Drug Trafficking Areas (HIDTA) • High Intensity Financial Crime Areas (HIFCA) • Transient populations • Border proximity

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Appendix J: Quantity of Risk Matrix

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Develop a risk assessment? • FinCEN Database • Prior exam reports • Entry letter items • Discussions with management • Call Report & UBPR • Bank’s website

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Risk Assessment Exercise

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Questions

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BSA/AML Examiner School FinCEN Download

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Session Learning Objective: Understand tools provided by the FinCEN database and how they can assist with exam planning

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Presentation

FinCEN Database

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FinCEN Database

What is FinCEN?

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FinCEN Database

How does the database help examiners?

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FinCEN Database

FinCEN Knowledge Library

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FinCEN Database

Highly Confidential Information

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FinCEN Database

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FinCEN Database Exercise

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Questions

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FinCEN Database

 Knowledge Library  Highly Confidential  Examination Assistance Tool

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BSA/AML Examiner School Exam Planning

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Session Learning Objectives: 1. Identify BSA/AML risks

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Session Learning Objectives: 2. Apply concepts by developing an exam scope and documenting the plan

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Presentation

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Go to www.menti.com and use the code provided

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Examination Scope

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Prior Exam Report & Workpapers

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Prior Exam Report & Workpapers

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Prior Exam Report & Workpapers

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Prior Exam Report & Workpapers

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Prior Exam Report & Workpapers

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Correspondence/Monitoring File

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Correspondence/Monitoring File

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Correspondence/Monitoring File

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Request List Items

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Request List Items

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Request List Items

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Request List Items

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Request List Items

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Request List Items

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FinCEN Data

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Transaction Testing Level

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Automated Monitoring Systems

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Examination Scope

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Examination Plan

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Examination Plan

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Examination Plan

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Work Program

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Staff Responsibilities

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Document the Plan

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Questions

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BSA/AML Examiner School BSA Officer Interviews

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Session Learning Objectives: 1. Prepare to

conduct effective interviews of the BSA Officer

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Session Learning Objectives: 2. Identify techniques for BSA Officer meetings

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Session Learning Objectives: 3. Apply concepts

by interviewing and evaluating the BSA Officer

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BSA Officer Interviews

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BSA Officer Interviews

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BSA Officer Interviews

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BSA Officer Interviews

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BSA Officer Interviews

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BSA Officer Interviews

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Assignment

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BSA/AML School Chatbot Text “bsaschool” to (240) 226-1778

• Training Reinforcement • Knowledge check questions • Helpful resources and tips

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Questions

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BSA/AML Examiner School Compliance Program

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Session Learning Objectives: 1. Discuss core

Bank Secrecy Act/Anti-Money Laundering concepts

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Session Learning Objectives: 2. Understand how to assess compliance with statutory and regulatory requirements

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Session Learning Objectives: 3. Apply concepts to exam exercises

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Presentation

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BSA/AML Compliance Program

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BSA/AML Compliance Program

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BSA/AML Compliance Program

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BSA/AML Compliance Program

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BSA/AML Compliance Program

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BSA/AML Compliance Program

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Core Examination Procedures

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Questions

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BSA/AML Examiner School Core Procedures

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Session Learning Objectives: 1. Understand how to assess compliance with statutory and regulatory requirements

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Session Learning Objectives: 2. Apply concepts to exam exercises

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Core Examination Procedures

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BSA/AML School Chatbot Text “bsaschool” to (240) 226-1778

• Training Reinforcement • Knowledge check questions • Helpful resources and tips

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Questions

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BSA/AML Examiner School OFAC Update

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Session Learning Objectives: 1. Understand OFAC compliance

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OFAC Review Go to www.kahoot.it

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OFAC Sanctions Update

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OFAC – Sanctions Update

Afghanistan not comprehensively sanctioned

Step 1. Check parties against SDN List

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OFAC – Sanctions Update

Afghanistan not comprehensively sanctioned

Step 2. If corporation/legal entities and not on list: KYC If not name of entity on SDN list: Is it owned 50% or more by SDN?

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OFAC – Sanctions Update

Afghanistan not comprehensively sanctioned

Step 3. Is there a general license?

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OFAC – Sanctions Update

Is Russia a comprehensive program?

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OFAC – Sanctions Update U.S. has limited trade activity with Russia

Designed a three-pronged search: 1. Check to see if on SDN list 2. Sanctions on parts of Ukraine – transactions should be rejected 3. Directive – making it hard for businesses

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OFAC – Sanctions Update

Blocked No access to money

Rejected Sent back to customer

Vs.

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OFAC – Sanctions Update

Russia incident ever evolving

Cuba June 9

Biden back to Obama’s administration

OFAC website categorized by country/program

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Questions

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BSA/AML Examiner School SAR Exercise

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Reliable BSA Information is Key

Effective SAR Narrative

Who What Where When Why

Clear Concise Chronological Comprehensive

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SAR Decisions

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Example 1: On 7/6/17 Gene Smith had an ATM Point of Sale at 8:00 pm at Marathon 6857 Versailles, West Virginia, for the amount of 35.89. On 7/10/17 a transaction was blocked as fraud for use at Marathon 1887 Versailles, West Virginia, Gene Smith. On 4/23/17 Mitch Lee had an ATM Point of Sale at 10:44 pm at Marathon 6857 Versailles, West Virginia, for the amount of 25.10. On 5/4/17 2:15 pm Marathon 1887 Versailles, West Virginia ATM Point of Sale for 55.00 Mitch Lee. A dispute was filed. On 4/29/17 Berry Levey had ATM Point of Sale for 53.90 at 8:27 am McDonalds 415 Versailles, West Virginia, which is the same store as Marathon 6857 Versailles West Virginia. On 5/15/17 a transaction was blocked as fraud at Marathon 1887 Versailles, West Virginia, Berry Levey. On 7/14/17 an ATM Point of Sale at 7:22 pm Marathon Petro 6857 Versailles, West Virginia for 33.99 Mitch Lee. On 7/20/17 ATM Point of Sale at 8:26 pm Marathon 6857 Versailles, West Virginia for 55.00 Mitch Lee. A dispute was filed. All debit Cards for each member has been blocked and new ones ordered.

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Example 2: On 4/10/2019 Bethany Walker came into the branch and wanted to withdraw $20,000 from her IRA. She requested a cashier’s check payable to Tashia Braden in the amount of $19,500 and the remaining amount was deposited into her checking account. Linda Mulberry, the BSA officer, questioned Bethany about the recipient of the cashier’s check to make sure that Liz knew the recipient. She stated, “everything was good and there was nothing to worry about.” On 4/15/2019 Bethany Walker came into the branch and wanted to withdraw $22,000 from her IRA. Bethany requested the cashier’s check payable line be left blank. Mulberry explained to her that we must make the cashier’s check payable to someone. She then requested it to be made payable to herself from her IRA. She asked Donna Taylor, the cashier, if this cashier’s check would be accepted at any other financial institution. Donna said that it would. On the same day, our bank was contacted by XX Bank to verify that the cashier check was issued to Bethany. She stated it was red flagged because it was issued payable to herself from her IRA and she was attempting to deposit it into an account for Tashia Braden. Tashia Braden is a customer at XX Bank, but the person verifying the check was not familiar with this customer or activity. On 4/16/2019 Bethany Walker came into the branch and deposited the $22,000 cashier’s check made payable to herself into her checking account and had a cashier’s check issued to Tashia Braden for the amount of $22,000.

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Example 3: Steve Garrett has been an established customer since July 22, 2012. He is the director of the Bracken County Council. Mr. Garrett’s account was showing up on the Check Kitting report through the bank’s automated monitoring system that is looked at daily. The BSA Officer Linda Mulberry pulled his activity on his account for January 2020 and February 2020 and a lot of cash was involved. The month of January 2020 a total of $28,689.00 in cash and for February 2020 a total of $18,630.00 of cash was deposited into his account. When reviewing the activity on his account the deposit would include a check from XX Bank or YY Bank, or it would only be a cash deposit. Then when reviewing the account, he would write a check from the ZZ Bank, which he would always go through the drive thru window. On February 25, the BSA Officer Mulberry contacted Steve and told him we would no longer accept check on XX Bank or YY Bank. Once he was contacted on the 25th couple days later he hasn’t shown up on the Check Kitting report through the automated monitoring system.

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Example 4: Bobbie Dayton opened his account online, has never been into the banking center, and told the credit union that he was disabled and would be getting social security. Since December 15th he has made $8,998 in deposits and $6,971 in withdraws. He has never had a social security deposit. December 15th, he made a $2,800 shared branch check deposit at XX Bank in Springfield, Ct. The next day he had trial deposits coming into his account from YY Bank. On December 27th he made a mobile deposit for $900.00 and withdrew a check from home banking for $3,400. January 2 the mobile deposit came back as NSF. January 2nd, we placed a stop payment on the home banking check he withdrew and then same day he did multiple ATM branch deposit again at XX Bank. The next day he did a cash withdraw at the ATM in Springfield, Ct. He is now having trial deposits from YY Bank and ZZ Bank.

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Example 5: I was notified by staff from the Virginia Branch that a member was making cash deposits out of her usual deposit pattern. It has continued that she is coming into the Virginia branch and making large cash deposits the same day or next day using a cash app to send the money back out of the account. Looking at the transactions she is occasionally keeping a small amount of the funds. Listed below is a list of the cash transactions activity in and out. I will continue to monitor this member’s activity. Sept 16, 2019- in- 1,200 Sept 21, 2019- in- 700 Oct 2, 2019- out- 900 Sept 17, 2019- out- 1,200 Sept 25, 2019- out- 2,100 Oct 4, 2019-in- 1,900 Sept 17, 2019- in- 1,700 Sept 25, 2019- in- 1,300 Oct 5, 2019- out 1,900 Sept 18, 2019- out- 1,800 Oct 1, 2019- out- 1,300 Oct 8, 2019- in- 2,100 Sept 21, 2019- out- 1,100 Oct 1, 2019- in- 1,000

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SAR Quality

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Example 1: SUSPECTED STRUCTURING - DEPOSITS WITHIN AWEEK OF EACH OTHER IN AMOUNTS OF $9,000.00 Suspected Structuring – On April 20, 2019, when reviewing daily reports for the Bank Secrecy Act, there was a new savings account that had been opened in the name of Grant Thomas #35456 with a cash deposit in the amount of $9,000.00. A week later on April 27, 2019, there was another cash deposit to the same savings account of Grant Thomas #35456, in the amount of $9,000.00. The account was flagged for potential structuring, with a review for the next week ending May 8, 2019, showing no additional cash deposits. Due to the initial cash deposit being in an amount right under the CTR threshold, with an additional cash deposit the very next week right under the CTR threshold, structuring was suspected, and this SAR was filed. Supporting documentation is located at the bank's main office.

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Example 2: Suspicious Activity - customer, Jeffery Smith, opened checking account #33611440 on January 25, 2020 with an initial deposit of $34,300.00. The deposit consisted of $34,000.00 cash and a foreign check in the amount of $300.00. A CTR was filed for this deposit on February 6, 2020, with a Tracking ID of XXXXXXX and a BSA ID of XXXXXX. Our records indicate that Mr. Smith's date of birth is October 16, 2000, making him 19 years old. He is currently employed by Southern Lakes Trucking, LLC as a truck driver, and when the account was opened on January 25, 2020, our records indicate he was employed at Southern Lakes Farm, Southern Lakes, GA, as a farm hand. When our New Accounts Representative asked where he got this much cash from, he stated he had been saving up. On February 5, 2020 he made a cash deposit of $2,500.00. On February 12, 2020 he deposited $700 cash along with a foreign check drawn on Mark Berton Trucking, LLC, in the amount of $300.00, for a total deposit of $900.00. The check was drawn on XX Bank, routing number XXXXXXX, account number XXXXXX, check number 6500. The other transactions on the account are debit card transactions. Due to the fact that Mr. Smith deposited a large amount of cash when he opened the account and is at such a young age, this activity has been deemed suspicious, and a SAR is being filed. Supporting documentation can be located at the bank's main office.

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Example 3: Ben Tallwood stole $3000 from his teller drawer. He told his supervisor that a gentleman came to his home the first week of April and mentioned his brother Laney Tallwood (who has been in a lot of trouble and is currently in jail) owed his employer a lot of money. The gentleman knew Tallwood’s name, his girlfriend’s name, parents’ names and even his dog’s name. He even had everyone's addresses. He knew that Tallwood worked at a bank and a lot of other personal information on all of them. The gentleman gave him 2 weeks to try and get the money. Tallwood was scared and didn't know where to turn to so he attempted to get loans to cover the debt but due to time limitations and complications on getting approved for the loan he panicked. Over the course of a week or so he took $4000 from his teller drawer. He paid the gentleman and hasn't seen or heard anything else. Tallwood had paid back $110.00 and was going to receive money next week to pay the rest. The supervisor had done a surprise audit on all the teller drawers and his came up $3890.00 short. He would force balance his drawer each day showing he had more strapped money than he had. The bank did contact the Police Department to press charges against Mr. Tallwood. Documentation available upon request.

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Example 4: Unknown suspect applied for membership with the Credit Union through website using DocuSign. Unknown suspect provided driver’s license using the name Bryn Todd address 123 Brightwood Drive. After becoming a member of the credit union, the unknown suspect applied for an unsecured loan in the amount of 9,000. The suspect was able to answer out of pocket security questions that only the true Bryn Todd should have been able to answer. He provided credit union with a paystub fromABC Factory. On October 1, 2019, the credit union received a call from the real Bryn Todd that he had received an alert on his credit report that we had pulled credit on him, and he was not aware of it or was not affiliated with the credit union and had not applied for membership or a loan. He also went on to inform the credit union that someone had tried to secure a loan the week before at another credit union using his information. At this point, I called the number listed on the paystub to verify employment to find out that they do not have anyone working for them named Bryn Todd. The loan officer working on the loan said she had contacted the unknown suspect because there was a freeze on his credit report. HE called her back and was able to have the freeze removed and tried to proceed with the loan. I ended up having a conversation that I requested he come into the branch for additional verification before we could proceed. HE stopped calling after that. I talked to the real Bryn Todd, and he sent me a copy of his DL just to see the different person on the DL with the different address. Unknown was using his SS# and Date of Birth. Filed a police report for identity theft.

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Example 5: SAR filed for suspicion concerning source of funds regarding a cash deposit by Linda Bryant into account 69654 at the main office. Bryant deposited $25,000 cash into account 69654 on 7-10-2019. The deposit was entirely comprised of $100s. Bryant is a retired county clerk. She told branch staff that the cash had been in a safe at her home and that her daughter advised she bring it in to the bank to deposit it. Regardless of whether or not the cash had been in a safe in her home, it still doesn’t explain how a retired county clerk had $25,000 in $100s to deposit.

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MSB’s, Money Transmitters & Prepaid Access

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Session Learning Objectives: 1. Understand how to

assess systems managing risks related to money transmitters & prepaid access

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Session Learning Objectives: 2. Understand how to formulate conclusions about the BSA/AML compliance program

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Money Transmitters & Prepaid Access

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Money Services Businesses (MSB) Definition Doing business in one or more of the following:

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Money Services Businesses (MSB)

Definition Doing business in one or more of the following: • Money Transmitter

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Money Services Businesses (MSB) Definition Doing business in one or more of the following: • Money Transmitter • IVTS

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Money Services Businesses (MSB) Definition Doing business in one or

more of the following: • Money Transmitter • IVTS • Currency dealer/exchanger

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Money Services Businesses (MSB) Definition Doing business in one or more of the following: • Money Transmitter • IVTS • Currency dealer/exchanger • Check casher

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Money Services Businesses (MSB) Definition Doing business in one or more of the following: • Money Transmitter • IVTS • Currency dealer/exchanger • Check casher • Issuer/seller of monetary instruments or prepaid access

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Money Services Businesses (MSB) Definition Doing business in one or more of the following: • Money Transmitter • IVTS • Currency dealer/exchanger • Check casher • Issuer/seller of monetary instruments or prepaid access • U.S. Postal Service

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Money Services Businesses (MSB) Thresholds

>$1,000 for any person on any day in currency, monetary or other instruments: • Foreign exchange dealers • Check cashers • Issuer/seller of monetary instruments

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Money Services Businesses (MSB)

Thresholds >$10,000 to any person during one day without policies and procedures to prevent such a sale: • Seller of prepaid access

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Money Services Businesses (MSB) Money Transmitting Occurs when funds are

transferred on behalf of the public by any and all means, including, but not limited to, transfers within the United States or to locations abroad by wire, check, draft, facsimile, or courier.

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Money Services Businesses (MSB)

Money Transmitting • FinCEN Registration Requirement

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Money Services Businesses (MSB)

Money Transmitting • Unlicensed activity

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Money Services Businesses (MSB)

Money Transmitting • No activity threshold

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Money Services Businesses (MSB) Exceptions

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Money Services Businesses (MSB)

Exceptions • Bank

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Money Services Businesses (MSB)

Exceptions • SEC/CFTC regulated

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Money Services Businesses (MSB)

Exceptions • Regulatory

oversight already in place

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Money Services Businesses (MSB)

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Money Services Businesses (MSB) Examinations • IRS

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Money Services Businesses (MSB) Examinations • States

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Money Services Businesses (MSB) Examination Materials • Fincen.gov/msb examination-materials

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Money Services Businesses (MSB)

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Money Transmitters

Basic Business Model:

Money Transmitter

Sender

Recipient

Internal Use Only

Money Transmitters

Business Model – Agent Included:

Money Transmitter

Branch or Agent

Sender

Receiving Agent

Recipient

Internal Use Only

MSB BSA Requirements

Internal Use Only

MSB BSA Requirements

FinCEN Registration: • Initial 180 days after established or money transmission began

Internal Use Only

MSB BSA Requirements

FinCEN Registration: • Renew every 2 years

Internal Use Only

MSB BSA Requirements

FinCEN Registration: • Re-registration requirements • Ownership or control changes • Transfer of voting power • Increase in agents • Within 180 days of change

Internal Use Only

MSB BSA Requirements

AML Program: • Internal Controls • Individual Responsible • Training • Independent Review

(look familiar?)

Internal Use Only

MSB BSA Requirements

Reporting - CTRs • Currency transactions >$10,000

Internal Use Only

MSB BSA Requirements

Reporting - CTRs • 15 days after

transaction date

Internal Use Only

MSB BSA Requirements

Reporting - SARs • Involves at least $2,000

Internal Use Only

MSB BSA Requirements

Reporting - SARs • MT knows or suspects no

business/lawful purpose

Internal Use Only

MSB BSA Requirements

Reporting - SARs • 30 days after initial detection

Internal Use Only

MSB BSA Requirements

Reporting - SARs • Issuers of

money orders or traveler’s checks

Internal Use Only

MSB BSA Requirements

Reporting - Other

• Report of International Transportation of Currency or Monetary Instruments (CMIRs) • Report of Foreign Bank and Financial Accounts (FBARs)

Internal Use Only

MSB BSA Requirements

• Guidance • Risk Considerations • Recordkeeping • Law Enforcement Requests

Internal Use Only

MSB BSA Requirements

• Guidance • Risk Considerations • Recordkeeping • Law Enforcement Requests

Internal Use Only

MSB BSA Requirements

• Guidance • Risk Considerations • Recordkeeping • Law Enforcement Requests

Internal Use Only

MSB BSA Requirements

• Guidance • Risk Considerations • Recordkeeping • Law Enforcement Requests

Internal Use Only

Prepaid Access • Definition • Open Loop • Closed Loop

Internal Use Only

Prepaid Access • Definition • Open Loop • Closed Loop

Internal Use Only

Prepaid Access • Definition • Open Loop • Closed Loop

Internal Use Only

Bank Exam Procedures

Internal Use Only

Bank Exam Procedures

Internal Use Only

Bank Exam Procedures

Internal Use Only

Bank Exam Procedures

Internal Use Only

Questions

Internal Use Only

MSB’s, Money Transmitters & Prepaid Access

Remember – these types of customers are not bad, just can be higher risk and must be managed!

Internal Use Only

Emerging Issues

Internal Use Only

Session Learning Objectives: 1. Discuss current issues relevant to BSA/AML

Internal Use Only

Emerging Issues

• • • • • • •

Beneficial Ownership FinCEN Priorities BaaS – Banking as a Service AI & Machine Learning

CRBs

Human Trafficking

Elder Financial Exploitation

Internal Use Only

Corporate Transparency Act (CTA)

Requirements: • Certain companies in the U.S. to report their BOI to FinCEN. • Reporting requirement will begin on January 1, 2024.

• Law enacted on January 1, 2021 • Part of the National Defense Authorization Act • Aims to enhance transparency & combat ML, TF, corruption, tax fraud, and other illicit activities.

Internal Use Only

Beneficial Ownership Information (BOI) Three Phases: 1. Who needs to register with FinCEN's national database? 2. Who has access to the national database? 3. FinCEN has until 2025 to develop new CDD rules – until then the same requirements need to be met by FIs

Internal Use Only

FinCEN Priorities

Internal Use Only

FinCEN Priorities 1. Corruption 2. Cybercrime 3. Terrorist Financing 4. Fraud 5. Transnational Criminal Organization Activity 6. Drug Trafficking Organization Activity 7. Human Trafficking & Human Smuggling 8. Proliferation Financing

Internal Use Only

BaaS – Banking as a Service BaaS partnerships differ from traditional vendor relationships in a variety of ways, notably in that they can present substantially higher degrees of risk. Accordingly, fintech partner oversight will form the core of the Bank’s future Third Party Risk Managment program. The FI should develop robust governing documentation to support the program. In particular, policy and program documents relating to Bank’s fintech partner oversight program should clearly address: • Roles and responsibilities • Reporting lines (board oversight and governance) • Testing and ongoing monitoring • Risk assessments • Partner due diligence and onboarding • Contractual safeguards • Contingency plans • Internal and external audits

Internal Use Only

AI & Machine Learning Technological advances in AML monitoring systems • AI, Machine Learning, other forms • BSA Officer responsibility

• AML Software • Fintech Partner • Fintech Customer • Trends • Discussion with examiners

STATE OF CALIFORNIA Department of Financial Protection and Innovation GOVERNOR Gavin Newsom · COMMISSIONER Clothilde V.Hewlett

The information discussed today does not represent the direct views or opinions of DFPI, but rather the examiner’s interpretation and opinion.

Internal Use Only

Cannabis-Related Businesses (CRBs)

Terminology: • Cannabis • Marijuana • Hemp

• THC • CBD

Internal Use Only

Cannabis-Related Businesses (CRBs)

February 9, 2024

Internal Use Only

Cannabis-Related Businesses (CRBs)

Internal Use Only

Cannabis-Related Businesses (CRBs)

Internal Use Only

Cannabis-Related Businesses (CRBs)

Internal Use Only

Human Trafficking in Financial Accounts

Internal Use Only

https://traffickingresourcecenter.org/

Internal Use Only

Elder Financial Exploitation Advisory issued on June 15, 2022 DEFINED: Illegal or improper use of older adult's funds, property, or assets. Do you have State laws that protect against this type of fraud and abuse?

Internal Use Only

Nebraska Elder Financial Exploitation Law 8-2903(1): When FI reasonably believes the financial exploitation of a vulnerable adult may have occurred, is occurring, FI may: Delay/refuse transaction, delay/refuse to permit withdrawals of funds, prevent change in account, refuse to comply with instructions given to FI by agent of person. 8-2903(3)(a)(i): FI may notify any 3 rd party reasonably associated with a vulnerable adult when exploitation may be occurring. 3 rd party includes, parent, spouse, adult child, sibling, known family member or close associate, authorized contact, co-owner, beneficiary, attorney in fact, trustee, guardian, attorney that has represented vulnerable adult. 8-2903(4): Authority granted in this section end sooner of 30 business days after date FI first acted under Act, or, when FI is satisfied, or termination by order of a court. *Senior Adult (Neb. Rev. Stat. § 28-366.01) Age 65+ *Vulnerable Adult (Neb. Rev. Stat. § 28-371) Age 18+ with substantial mental or functional impairment or a guardian or conservator is appointed

Internal Use Only

Questions

Internal Use Only

BSA/AML School Chatbot Text “bsaschool” to (240) 226-1778

• Training Reinforcement • Knowledge check questions • Helpful resources and tips

Learning Roadmaps

The CSBS Learning Roadmaps are tools to help guide examiners through their learning journey by identifying skill gaps and training opportunities. These tools can also help examiners determine what training is needed to earn formal certification. Available Learning Roadmaps Bank Safety & Soundness Examiners BSA/AML Examiners IT/Cybersecurity Examiners

Developing the Workforce of Tomorrow One of the CSBS strategies is to contribute to innovative learning solutions and develop capabilities that enhance examiner skillsets and promote networked supervision resulting in a high performing, collaborative, and trusted state regulatory workforce.

Money Service Business (MSB) Examiners Mortgage/Non-Depository Examiners Trust Examiners

LearningRoadmaps@csbs.org www.csbs.org/examiner-learning-roadmaps

CSBS Accreditation

CSBS Certification The CSBS Examiner Certification Program recognizes the professionalism and unique skillsets of state regulators and is open to all who meet the education and experience qualifications for a credential. 31 Certification Credentials Safety & Soundness

The CSBS Accreditation Program evaluates state bank, mortgage and money transmitter regulatory agencies against standards set forth by a committee of state regulators. Benefits of Accreditation

Developing the Workforce of Tomorrow One of the CSBS strategies is to contribute to innovative learning solutions and develop capabilities that enhance examiner skillsets and promote networked supervision resulting in a high performing, collaborative, and trusted state regulatory workforce.

Creates Supervision Framework Promotes Process Standardization Builds Trust Improves Information Sharing Keeps States Accountable Recognizes Agencies Performance

Mortgage Licensing Trust IT & Cybersecurity Data Analytics Training

certification@csbs.org csbs.org/examiner-certification

accreditation@csbs.org csbs.org/department-accreditation

Education or training which has been determined to be essential in maintaining and enhancing skills or knowledge necessary for the performance of a job for which the certification is required. Continuing Education Classifications Core Education, training, or other activities which has been determined will enhance skills or knowledge necessary to effectively work as an examiner or regulator including but not limited to soft skills, technical trainings, providing on the-job training, participating on CSBS committees. Training completed as part of employment or general interests but does not directly contribute to the proficiency of the certification maintained. General courses will not count toward continuing education. General Elective

Providing a Path

Certification can assist agencies in developing the workforce of tomorrow by providing a framework for career progression and professional development.

Continuing education to take state regulators to the next level.

Training directors decide what their examiners need Tie in training to certifications Certification as a measure for career progression

Acquiring and maintaining a CSBS Certification gives regulators the opportunity to advance their career along a well-defined career path, encourages knowledge and skills development and recognizes and rewards achievement.

Training Directors will be able to identify courses that align with an examiners credential, maintaining the education and career path provided by their agency in combination with a CSBS certification. Program Improvements