Bank Secrecy Act · 3/19/2013 · Smurfs 1. Large, conspicuous amount of cash 3. Money is again...

Bank Secrecy Act:

Judy Graham, Program Officer

Office of Examination and Insurance

NCUA Update

March 19, 2013

Overview

• NCUA BSA Regulation

• Most Common violations

Bank Secrecy Act: NCUA Update 2

• Most Common violations

NCUA Regulation

• 12 C.F.R. 748.2 requires every federally insured credit union to

establish a BSA compliance program that :

– Establishes a system of Internal Controls to ensure ongoing

BSA compliance

– Provides for Independent Testing for BSA compliance by – Provides for Independent Testing for BSA compliance by

the credit union or outside party

– Designates a BSA Compliance Officer responsible for

monitoring day-to-day compliance

– Establishes a BSA Training program for appropriate

employees and volunteers

– Establishes a Customer Identification Program


Most common violations cited

�Training

�Not recent

�Not documented

�Doesn’t cover credit union’s policy & procedures

�No training for Board of Directors



• Independent Testing

�Not covering all credit union operations

�Not recent (12 to 18 months)

�Not independent



• Internal Controls

�Risk assessment not updated

�Suspicious Activity Monitoring System inadequate



• Data Quality Errors in CTR/SAR filings

• Incomplete forms

• Blank narrative on SARs

• E-filing of all BSA forms required as of July 1, 2012

• BSA e-file – www.fincen.gov



• Notification of SAR filings to BOD

�Not included in minutes

�The BOD should be aware of suspicious activity

�SAR information is extremely confidential – A

generalized report to BOD is sufficient



• Information Sharing (FinCEN 314(a) lists)

�Not checking the lists

�No documentation

• Self certification forms available

• Update point of contact – CU Online


Resources

• www.ncua.gov

– Regulations, Publications and reports

– Bank Secrecy Act

• www.fincen.gov

• www.ffiec.gov


Office Contact Page

Feel free to contact our office with questions or

comments.

Primary Staff: Judy Graham

Program Officer

[email protected]


[email protected]

Office Phone: 703-518-6392

Secondary Staff: [email protected]

Introduction Introduction –– Kent MarcumKent [email protected] (859) [email protected] (859) 341--57185718

� Graduate University of Kentucky� 28 Year Law Enforcement Veteran � IRS Criminal Investigation – Cincinnati (Retired)

– Complex Tax Fraud and Money Laundering Investigations• Organized Crime, Narcotics, Other Illegal Income• Expert Testimony in Switzerland• Expert Testimony in Switzerland• Worked with Scotland Yard and other Foreign Countries

� Training– Local, State, Federal, and Foreign Police Officers

� Current– Attorney– Financial Investigations Consultant– Kenton County Planning Commission– Resident of Kentucky

Gold SchemeGold Scheme

San San FranciscoFrancisco

New New YorkYorkWire TransferWire Transfer

Wire TransferWire TransferCustoms Customs

HouseHouse

GoldGoldGoldGold

JewelryJewelryStoreStore

GoldGold

MexicoMexico

BelgiumBelgium

GoldGold

GoldGoldWholesaleWholesale

HouseHouse

GoldGold

Federal StatutesFederal Statutes

Bank Secrecy Act

Money Laundering

Statutes - 14

Bank Secrecy Act RequirementsBank Secrecy Act Requirements

� CTR

� CTR-C

� CMIR

� FBAR

� MSB

� SAR

� 8300

Statutes - 15

Currency Transaction ReportCurrency Transaction Report

CTRCTR

� Requires financial institutions to report

– currency transactions

– aggregating over $10,000

– during one business day– during one business day

� Penalties

– 5 years / $250,000 fine

Statutes - 16

Reporting ProceduresReporting Procedures

� What to file

– Currency Transaction Report (CTR), FINCEN Form 104

CTR

� Where to file

– Filed with IRS, Detroit Computing Center

� When to file

– No later than 15 calendar daysafter transaction

15days

Statutes - 17

Transaction DefinedTransaction Defined

� Deposit, withdrawal, transfer or exchange of currency

� Loan or extension of credit� Loan or extension of credit

� Purchase or sale of stocks, bond, CD, monetary instrument

Statutes - 18

Financial InstitutionsFinancial Institutions

31 CFR 103.1131 CFR 103.11

� Banks

� Securities Brokers

� Currency Exchanger

� Issuer of Money Orders

� Transmitter of Funds

� Telegraph Company

� Check Cashing Services

� Casinos

� U.S. Postal Service

Statutes - 19

Bank Log Bank Log

31 CFR 532531 CFR 5325

• Institution may not issue nor sell the following in amounts of $3000 or more:

- Bank Checks - Cashier’s Checks

- Traveler’s Checks - Money Orders- Traveler’s Checks - Money Orders

Unless

- Is Account Holder at institution

- Furnishes ID needed to cash check

Statutes - 20

Other OptionsOther Options

� Exemption Lists– Unilateral Business Exemptions

– Exemptions requiring IRS OK– Exemptions requiring IRS OK

– Non-Exemptible

� Structuring (Smurfing)

� Geographical Targeting OrderStatutes - 21

QuizQuiz

Would a CTR be required IF:

Subject goes to a bank, withdraws Subject goes to a bank, withdraws $11,000 in currency from his bank account. He then goes to another bank and purchases a $5,000 and $6000 cashier’s check.

Statutes - 22

QuizQuiz

Would a CTR be required IF:

Subject goes to a bank and has $23,000 Subject goes to a bank and has $23,000 wire transferred directly from his account to an account in Ecuador.

Statutes - 23

CTRCTR--CC

� Requires casinos with annual revenue over $1 million to report

– currency transactions

– aggregating over $10,000– aggregating over $10,000

� Penalties

– 5 years / $250,000 fine

Statutes - 24


� What to file

– Currency Transaction Report - Casinos(CTR-C), FINCEN Form 103

� Where to file

CTR-C

� Where to file


– Nevada casinos file with the State of Nevada

� When to file

– No later than 15 calendar daysafter transaction

15days

Statutes - 25

Transaction DefinedTransaction Defined

� Deposit, withdrawal, transfer or exchange of currency

� Payments on credit line with currency� Payments on credit line with currency

� Purchase or redemption of casino chips for currency

Statutes - 26

QuizQuiz

Would a CTR-C be required to be filed with the federal government IF:

Subject purchases $10,500 in chips at a black jack table in Las Vegas with currency.

Statutes - 27

QuizQuiz

Would a CTR-C be required IF:

Subject takes $18,000 in chips to the Subject takes $18,000 in chips to the casino cage in Atlantic City and has the money wire transferred to Turkey.

Statutes - 28

Currency and Monetary Instrument ReportCurrency and Monetary Instrument Report

CMIRCMIR

� Requires individuals to report

– transport of currency & monetary instruments into or out of the US

– aggregating over $10,000– aggregating over $10,000

� Penalties

– 5 years / $250,000 fine

– Forfeiture

Statutes - 29


� What to file

– FINCEN Form 105 (CMIR)

� Where to file

CMIR

� Where to file

– Filed with US Customs Service

� When to file

– At the time of entry intoor departure out ofthe United States Statutes - 30

QuizQuiz

Would a CMIR be required IF:

Subject carries $82,000 in currency Subject carries $82,000 in currency across the Canadian border in a suitcase.

Statutes - 31

QuizQuiz


Subject mails $18,000 in currency of Subject mails $18,000 in currency of legitimate money to his brother in Paris for the purpose of investing in the French stock market.

Statutes - 32

QuizQuiz


Subject has $26,000 in currency in his Subject has $26,000 in currency in his possession. He gives $9,000 to his friend, $9,000 to another friend, and keeps $8,000 on his person. Each of the individuals then walk separately across the Mexican border.

Statutes - 33

Foreign Bank Account ReportForeign Bank Account Report

FBARFBAR

� Requires individuals to report

– interest in foreign accounts

– aggregating over $10,000

– during a calendar year– during a calendar year

� Penalties

– 5 years / $250,000 fine

Statutes - 34

AggregationAggregation

� Requires aggregation of separate accounts for different countries

Switzerland Account 2,301

Denmark Account 1,007

Grand Cayman Account 7,500

Total Interest 10,808

Statutes - 35


� What to file

– Form TD F 90-22.1

� Where to file

TD F

90-22.1

� Where to file


� When to file

– No later than June 30 of thesucceeding calendar year

Jun

30

Statutes - 36

QuizQuiz

Would an FBAR be required IF:

Subject, who is a U.S. citizen, maintains Subject, who is a U.S. citizen, maintains three bank accounts in various foreign countries. In June of this year the balance in account A is $3,000,

the balance in account B is $5,000,

and the balance in account C is $8,000.

Statutes - 37

QuizQuiz

Would an FBAR be required IF:

Subject, who is a citizen of Mexico but Subject, who is a citizen of Mexico but makes frequent business trips to the U.S., has a secret bank account in the Cayman Islands with an average balance exceeding $100,000.

Statutes - 38

Suspicious Activity ReportSuspicious Activity Report

SARSAR

� Requires financial institutions to report

– transactions aggregating $5000 or more

– transactions involving potential violations of M/L laws and currency violationsM/L laws and currency violations

– if the institution believes the transaction is suspicious

� Penalties

– 5 years / $250,000 fine

Statutes - 39

Suspicious Activity Report (SAR)Suspicious Activity Report (SAR)

Financial Institutions:

� Banks

� Securities & Futures

Casinos & Card Clubs� Casinos & Card Clubs

� MSB

� More to follow !

Statutes - 40


� What to file– Suspicious Activity Report -

Treasury Form

� Where to file

TD F

90-22.47

� Where to file– FinCEN, Detroit Computing Center

� When to file– No later than 30 calendar days after

initial detection30

days

Statutes - 41

QuizQuiz

Would an SAR be required IF:

Subject brings $17,000 in currency to his bank and attempts to deposit the money. bank and attempts to deposit the money. The teller informs him that a CTR will be filed. He deposits only $9,000 and returns the next day with the remaining $8,000 and purchases a cashiers check payable to a bank in Antigua.

Statutes - 42

QuizQuiz

Would an SAR be required IF:

Subject makes 3 to 4 deposits of currency each week, always in amounts ranging each week, always in amounts ranging from $5,000 to $9,700, into 2 different corporate accounts. The accounts appear to have no legitimate business activity and all the funds are periodically wire transferred to various Caribbean island accounts.

Statutes - 43

Form 8300Form 8300

� Requires trade or businesses to report

– receipt of over $10,000 in currency or monetary instrument

– aggregated over a 1 year period – aggregated over a 1 year period

� Penalties

– Failure to file

• 5 years / $250,000 fine

– Filing a false form

• 3 years / $250,000 fine

Statutes - 44

Cash DefinedCash Defined

� Currency

� Coin

� The following in amounts under � The following in amounts under $10,000:

• cashiers checks

• bank drafts

• travelers checks

• money orders

Statutes - 45


� What to file– Form 8300

• Pre 2002 - Access to Form 8300 is generally restricted to IRS (See CD)

Where to file

8300

� Where to file– Filed with IRS, Detroit Computing Center

� When to file– No later than 15 calendar days after transaction

15days Statutes - 46

Trades & BusinessTrades & Business

� Jewelry Store

� Furniture

� Boat Sales

� Real Estate Brokers

� Construction Contractors

� Insurance Co.

� Aircraft Sales� Real Estate Brokers

� Auto Sales

� Travel Agencies

� Aircraft Sales

� Attorneys

� All other NFI’s

Statutes - 47

QuizQuiz

Would an 8300 be required IF:

A customer purchased a Corvette for $52,000. He gives the dealership an $8,000 currency He gives the dealership an $8,000 currency down payment in the morning, agrees to pay another $5,000 in a month, and finance the balance. He pays the dealership the $5,000 in currency exactly 33 days from the date of purchase.

Statutes - 48

QuizQuiz

Would an 8300 be required IF:

Subject purchases a new Master Craft ski boat. He gives the dealership $7,000 in currency on He gives the dealership $7,000 in currency on the day of the sale and signs a promissory note for the balance of $18,000 to be paid in 90 days. When the note comes due the subject writes a personal check to the dealership for $18,000.

Statutes - 49

Money Service BusinessMoney Service Business

� Requires MSB to file form TD F 90-22.55

– Due by 12/31/01 or within 180 days after the business begins operation

– Requires 2 year update by 12/31 of the second calendar yearcalendar year

– Filed with IRS Detroit Computing Center

– Maintain a list of agents and update annually

� Penalties

– 5 years / Fine

180days

Statutes - 50

Money Service BusinessMoney Service Business

�Money Transmitters

�Currency Dealers or Exchangers

�Check Cashing Services�Check Cashing Services

� Issuers, Sellers, or Redeemers of Traveler’s Checks, Money Orders, or Stored Value

Statutes - 51

Ancient Methods of Moving Money

Jerusalem Nazareth

Ancient Methods of Moving Money

BrokerBroker

How the Hawala System WorksHow the Hawala System Works

Worker Dealer

ForeignCurrency

U.S.Dollars

Foreign Dealer

Destroy Records

OverOver--invoicing Schemeinvoicing Scheme

$1 million Worth of Goods

$2 million Invoice for Goods

$2 million Wire Transfer

$2 million Invoice for Goods

Dealer A Dealer B

Hawala SchemeHawala Scheme

Clearing HouseDubai, UAE

Corresp.

Then toU.S.

Corresp.Bank

Dealer A Dealer B

Black Market Peso ExchangeBlack Market Peso Exchange

DrugDealer

PesoBroker Goods

“Legit”Biz Man

DrugDealer’s

Bank

PesoBroker

SmurfsSmurfs

1. Large, conspicuousamount of cash

3. Money is again divided

into several bank accounts

4. Money wired from

small bank accounts

to one accountat a larger bank2. Large amount is

divided intosmaller amounts

Black Market Peso ExchangeBlack Market Peso Exchange

DrugDealer Goods

PesoBroker

ML International 10/27/98Mar-03

PesoBroker

“Legit”Biz Man

DrugDealer’s

Bank

Bank Secrecy Act · 3/19/2013 · Smurfs 1. Large, conspicuous amount of cash 3. Money is again...

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