Customer Due Diligence! New BSA Regulation

Recorded on June 9, 2016   |   With Ken Golliher

Customer Due Diligence! New BSA Regulation

With Ken Golliher
  • 1 Video
  • 6 PDFs
  • 2.0 hrs
Course description

ICB Credit: 2.5 CRCM

January's Geographic Targeting Order focused on Miami and New York real estate transactions. The 60 Minutes' "Anonymous, Inc." story several days later. Most recently, "The Panama Papers." -- All of these recent events combined to make the public aware that legal entities, e.g. corporations, offer individuals the anonymity they need to launder or hide proceeds from illegal activity.

U.S. financial institutions have been given 2 years, until May 11, 2018, to develop individual programs for identifying a legal entity's "beneficial owners" at account inception. Examiners and auditors cannot mandate early compliance (although their attempts have been documented in the BankersOnline Threads), but they can critique a bank's understanding of the new regulation or the adequacy of its steps toward compliance at the time of their review.

The anonymity afforded by legal entities has been obvious to the banking industry since the 2005 U.S. Money Laundering Threat Assessment called out Nevada, Wyoming, and Delaware for offering "cloaking features" to incorporators that rivaled those in offshore jurisdictions. A decade ago, FATF's 2006 mutual evaluation confirmed that the U.S. opens its arms to individuals who want to hide their activities behind the impenetrable veil of a corporation.

This fast-paced 2 hour session allows attendees to familiarize themselves with the requirements of the new regulation and develop an implementation plan that will require board involvement in revising policies and operational involvement in revising account opening procedures. While there are some noticeable parallels between the CDD and the CIP regulations, the CDD regulation does not allow existing customers to be grandfathered. It is triggered every time a legal entity opens an account, whether it is a loan or a deposit account in the commercial bank or an escrow account in the trust department. That is true whether the legal entity is a new or a longstanding customer.

Topics addressed in the webinar include:

  • Legal entities 101
  • Analyzing the Preamble and the Regulation
  • What does your policy say about due diligence?
  • Owners vs. "Beneficial" Owners
  • The new Appendix A
  • Revising Appendix A
  • Trashing Appendix A
  • How do we verify identity?
  • Supplementing your CIP with a BOCIP
  • Handling identification misfires
  • Exempt entities
  • Record retention
  • Revising policies
  • What do we do with the information? (Putting it in a file until an examiner asks for it is not the right answer.)
  • How did BSA regulations sprout a fifth pillar when the statute only lists four?
  • So, now a "pillar violation" violates two regulations?
  • Establishing and updating a customer risk profile

Prior to the webinar::

Ken has asked us to encourage you to read the new regulation prior to the program. Referring to the pagination of the advance copy, the portion of the regulation that applies to banks begins on page 205 and runs through page 221. Next, read part III, the Section by Section Analysis. For banks, it begins on page 26 and goes through page 96. Compare it to your understanding of the regulation you just read.

Your preparation will put you in a better position to consider some of the suggestions made in the webinar.

Who Should Attend:
The program is focused on new requirements added to the Bank Secrecy Act regulations. Those who would naturally attend are the BSA Officers and Auditors. However, the most direct impact of this new regulation is going to be on those who design and manage the "new accounts" process which will be tasked with obtaining more information from legal entity customers. They need to be in the room and kept informed when these decisions are made.

Course Curriculum

New BSA Regulation: Customer Due Diligence!
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ABA Staff Analysis
Sample CDD Policy
Questions and Answers
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Ken  Golliher
Ken Golliher

Ken is a principal with Pegasus Educational Services, LLC, a training firm headquartered in Louisville, Kentucky. He is an experienced banker with a unique ability to reduce complex legal concepts to plain English. He has explained the "why" and "how" of regulations to thousands of financial institution personnel and examiners. Ken's banking career began in 1972 and includes serving as a teller, commercial operations manager and as trust department legal counsel in a state and a national bank. For ten years he headed the education division of a regional consulting firm for financial institutions. He has served on the faculty of the LSU Graduate School of Banking, the OTS' Level I Compliance School and the FDIC's Advanced Consumer Protection school for examiners. He has presented seminars in more than 25 states and has served as an instructor at compliance schools sponsored by the Illinois, Indiana, Iowa, Georgia, Kansas, Kentucky, Nebraska, Oklahoma, Pennsylvania and Texas bankers associations. He is a member of the Society for Applied Learning Technology. He is also a "BOL Guru."