Community Banks and Learning from BSA Enforcement Actions:
Hindsight is 20/20
Most community bank compliance
professionals likely think, Okay, what
did the bank do this time, and do I really
have time for this with everything else on
my to-do list? This is obviously a choice
that must be made, but when it comes to
Bank Secrecy Act/Anti-Money Laundering (BSA/AML) enforcement actions,
the answer should be “Yes!”.
Why Should these Enforcement
Actions Matter to Me?
You can’t manage what you can’t quantify and you can’t quantify what you
don’t track.
The BSA/AML enforcement actions
are are more concerning than the compliance or safety and soundness-only
enforcement actions because those involved include:
1. the bank’s primary federal regulator
(and often the state regulator as well)
2. the Financial Crimes Enforcement
Network (FinCEN), the Department
of Treasury’s enforcement arm
3. Department of Justice (DOJ)
It seems that the greater the civil
money penalty, the more extensive the list
of violations and infractions that are detailed in the public document. Sometimes
the volume of violations is the problem,
and sometimes it is the sheer magnitude
of the infractions. Sometimes it is both.
These documents should be read and
reviewed thoroughly by bankers of all
sized institutions, but even more so by
community bankers for several reasons.
First, it is imperative that the compliance management program receives
all communications. and these can be
obtained from daily e-mail updates from
national and state trade associations, but
it is most beneficial to obtain the information directly from the source because
other information related to the regulatory issues is linked, and it is generally
available a day earlier than other sources.
The bank’s regulator, FinCEN, DOJ,
OFAC, and others are great resources
for information beyond enforcement
actions related to other financial institutions. Each website provides direct email
for specific notices, and a wealth of other
information that could be utilized for
training purposes also.
Community banks are not often in
the crosshairs of the regulators in the
world of BSA/AML, as typically there is
the expected HMDA, flood, and lately the
gradual development of the ever concerning UDAP violations. However, there
are the occasional instances where the
violations do occur. Share with your staff
when you become aware of each instance,
big bank or small, and consider the most
important points of how and why the
other institution became the poster child
this time (after your initial jaw dropping
response of “OMG, they did THAT?”).
Everyone is quick to judge because
the information went public, but stop
and take a thorough look at the situa-
tion’s clues, patterns, hints, and docu-
mented failures to determine why it
happened and make sure nothing even
remotely similar is happening in your
own shop.
Compare Your Own Program
1. It may sound odd, but a good staff
discussion includes a dissection of the
entire document. Sometimes it is difficult
to tell the entire story, as those on the outside will never know what really went on
inside the organization––the exams and
audits, and the executive management’s
discussions and final decisions before the
formal actions.
2. Often comments that reference previous exam findings such as ‘willfully
violated’ or a reference to the ‘clearing of
alerts generated by the automated AML
system’ tell volumes of a bank’s systems
and processes. But more importantly,
they tell of its priorities, or even of a lack
of understanding of the seriousness of
their responsibility as a gatekeeper of the
U.S. financial system. If management isn’t
aware of a particular situation, they can’t
help the staff. If they are aware of the situation and don’t provide guidance or other
support, it is possible they don’t fully
understand the magnitude of the particular situation. If after communicating
the issues clearly, the message is still not
received seriously, trouble could occur.
3. Be sure to review the products and
services listed in the document as well.
If your organization doesn’t offer these
(i.e. international branches, complex international wire transfer services, private
banking services, money service business
accounts, third party payment processor
accounts, etc.), then there is that much
less for you to worry about. If the details
are regarding more domestic products
that all banks offer, then by all means
ALL BANKERS LOOK TO THEIR RESPECTIVE REGULATORS for various forms of information on topics such as pending and revised regulations, advisories and formal guidance from the inter-agencies, newsletters on hot topics and regional problem areas, and even exam
schedules. One of the least pleasant forms of communication available from the
federal regulators is the formal enforcement action. These publications are just as
important from the regulator’s perspective because they communicate activity
the rest of the banking world should take seriously.
