When it Comes To BSA Violations The Punishment Should Fit The Crime

August 27, 2020 at 9:25 am Leave a comment

On August 12th financial regulators, including the NCUA, issued a joint statement clarifying for both examiners and financial institutions the approach that should be taken to addressing violations of BSA/AML regulations.

Over the last couple of weeks there’s been a lot of analysis of this guidance.  My major takeaway is that examiners should strive to make sure that if they discover BSA violations, the punishment should fit the crime, meaning that Cease and Desist orders should generally only be issued for the most serious violations which reflect systematic deficiencies in a financial institution’s compliance program.  It explains that:

…an institution that has deficiencies only in its procedures for providing BSA/AML training to appropriate personnel ordinarily may be subject to examiner criticism and/or supervisory action other than the issuance of a cease and desist order, unless the training program deficiencies, viewed in light of all relevant circumstances, are so severe or significant as to result in a finding that the organization’s BSA/AML compliance program, taken as a whole, is not effective.

In case you’re curious, the statement clarifies your credit union’s requirements pursuant to 12 U.S. Code § 1786 (q)(2) which mandates that regulators review a credit union’s compliance with BSA/AML regulations.

A second statement issued regarding BSA/AML compliance relates to your credit union’s obligations for monitoring accounts opened by Politically Exposed Persons (PEPs).

According to the statement, while there is not a regulatory definition of PEPs, it is generally defined within the financial industry to refer to foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates.

Since this definition does not include American politicians- a distinction which was of no benefit to former New York Governor Spitzer, this statement will not impact most credit unions, but for those of you with foreign nationals, you will find it helpful.

On that note, enjoy your day.

Entry filed under: Compliance, Regulatory. Tags: , , , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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