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How to Proactively Combat Increasing Regulatory Enforcement

July 30, 2018
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Be Proactive with Your BSA Program to Avoid Hefty Regulatory Penalties

The number of regulatory enforcement actions and inspections have continued to rise. If you’re a financial institution of any sort, that’s an unsettling thing to hear. According to a survey published by PwC earlier this year, 32% of participants were either currently under an enforced remediation program or received a regulatory inspection with major feedback to address. Additionally, 54% of participants said they expect more changes in the regulatory environment to directly impact their organization in the next 2 years.

As regulatory scrutiny increases for financial institutions, enforcement actions resulting in civil money penalties are only growing both in size and frequency.

In February 2018, FinCEN published an additional $185 million civil money penalty against a major bank in the United States due to willfully violating the BSA’s program and reporting requirements over a 4-year period. The bank made the following violations:

  • Capping the number of alerts its automated transaction monitoring system would generate for investigations;
  • Allowed non-customers to conduct currency transfers at its branches through a large money transmitter;
  • Employed inadequate procedures to identify and address high-risk customers which in turn caused it to fail to effectively analyze and report the transactions of such customers;
  • Filed thousands of currency transactions reports (CTRs) that provided materially inaccurate information to FinCEN.

These violations were enforced after both institutions failed to develop and implement an anti-money laundering program with an emphasis on internal controls, customer due diligence program, independent validation, violated the requirement to file CTRs and to report suspicious transactions.

In May 2018, the Financial Crimes Enforcement Network (FinCEN) issued an $8 million civil money penalty against a casino in California due to multiple BSA violations. It was determined that the casino willfully violated the BSA’s program and reporting requirements over almost a 9-year period. The casino failed to:

  • Implement an adequate system of internal controls;
  • Conduct adequate independent testing;
  • Report suspicious transactions involving AJC chips used to facilitate loan-sharking.

FinCEN determined that the casino willfully violated the BSA and its regulations resulting in a multi-million-dollar fine.

These numbers and enforcement actions can seem scary and daunting – especially as BSA officers are also being held personally liable for violations.

Helping community financial institutions manage risk and drive growth is in our DNA.

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So, how can you protect yourself and your Financial Institution? It’s simple: be proactive.

Is there an area that your institution’s BSA program is lacking? Address that aggressively before it becomes the reason you get slapped with an enforcement action.

Proactively defend your program. Focus on its safety and soundness through strong internal controls and overall staff training. The FFIEC states internal controls should:

  • Identify banking operations (i.e., products, services, customers, entities and geographic locations) more vulnerable to abuse by money launderers and criminals; provide periodic updates to the bank's risk profile; and provide for a BSA/AML compliance program tailored to manage risks;
  • Inform the board of directors or a committee thereof, and senior management, of compliance initiatives, identified compliance deficiencies and corrective action taken, and notify directors and senior management of SARs filed;
  • Identify a person or persons responsible for BSA/AML compliance;
  • Provide for program continuity despite changes in management or employee composition or structure;
  • Meet all regulatory recordkeeping and reporting requirements, meet recommendations for BSA/AML compliance, and provide for timely updates in response to changes in regulations;
  • Implement risk-based CDD policies, procedures, and processes.

Click here for the complete list of what internal controls should cover, as noted by the FFIEC.

Build a culture of compliance that your entire staff, from top to bottom, buys into. Your staff should go through a BSA/AML training overview every year to help support your BSA efforts. Our Professional Services team can assist with this by hosting in-person or remote training for your staff, whether you are a BAM+ user/customer or not. We can do an all-encompassing BSA training or focus on teller groups, lending, the board of directors, etc. Contact us today to get more information on staff training.

Make sure your BSA program has strong monitoring and control systems in place to detect issues before they are discovered in examinations. Some of these issues include inadequate or missing parts of your written BSA policies and procedures, missing or incorrect portions of SAR and CTR forms, inadequate wording and investigation efforts on alerts, the need for a more streamlined software solution rather than manually monitoring all aspects of the BSA program, a lack of quality control function and not filing SAR or CTR reports in a timely manner. By the time an exam comes around, it’s too late to make these adjustments.

Additionally, the bank board of directors can really set the tone for BSA at your institution. If they are active participants and truly know the potential penalties and liabilities they face with a weakened program, you have a strong advocate in advancing and strengthening your BSA program.

We can help

As former bankers and BSA officers, we know that this can seem like a lot of extra work as you’re already getting asked to do more with less. To help lighten the load, Abrigo has a group of experts that can assess your BSA program and help address any issues, giving you renewed confidence in your program. We provide various services including BSA Exam Preparation, Enforcement Action Resolution, Suspicious Activity Monitoring, Temporary BSA Officer placement, and many more. We also offer custom projects, so if you have an idea or aren’t even sure of where to start, contact our Advisory Services team to complete a customer scope. While we’re proud of the software solutions we provide, we’re more proud of seeing our customers succeed in fighting financial crimes.

About the Author


Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo’s platform centralizes the institution’s data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth. Make Big Things Happen.

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.