Bank Secrecy Act (BSA) and Anti Money Laundering (AML) regulations have always applied to banks and credit unions. In recent years, the law has been expanded to include a wide array of financial institutions. The goal of these regulations is to “safeguard the financial system from illicit use and combat money laundering and promote national security.”
The basic components of a BSA/AML compliance program and why they are needed include:
- Risk Assessment
Each financial institution has different risk profiles as each institution differs from one another. The Treasury Department’s Financial Crimes Enforcement Network (FinCen) recognizes these differences and understands that there is not a single compliance program that will work for all. This is why risk assessment is the most important and the first step in developing a compliance program. Businesses should identify these risks, review their products and services, customers, and locations. Lastly, they should be evaluated and categorized by risk level.
- Internal Controls Review
During the internal review process, policies and procedures should be evaluated and the processes of the financial institution to achieve AML compliance as well. During the review, internal responsibilities should be clear, and the procedures should follow secure standards, such as dual controls and segregation of duties. At the base of AML regulations is mandated reporting so systems have to be calibrated to generate reports as record keeping and retention is critical.
- Independent Testing (Audit)
Third-party auditing is a basic principle of risk management. The recommended practice is a review every 12 to 18 months for AML compliance.
- BSA/AML Compliance Officer
Every institution should have a designated BSA/AML compliance officer. This individual should be knowledgeable in BSA/AML regulations, be able to design and implement the program, and ensure that senior management and the board adhere to the policies and are aware of the business’ compliance status.
- BSA/AML Compliance Training
It is necessary for businesses to conduct compliance training so that employees are aware of key components of the BSA/AML program. Overall, anti-money laundering responsibility should be communicated to every employee. Training should be administered periodically, especially when new individuals join the organization.
BSA/AML compliance is becoming an important component needed to run a financial institution of almost any kind. The experts at ODMPSI have created numerous compliance for various financial institutions and they are ready to help you get started.