| Did
you know the most costly compliance area for banks involves the Bank Secrecy
Act (BSA) according to Compliance Watch 2003: The Nationwide Bank Compliance
Officer Survey? For many compliance officers, this finding from the
joint
survey (File Size Warning: 2 MB)
published by Bankers Systems and the American Bankers Association, is
not surprising given the complexity and penalty structure of this particular
law.
Looking closer at
BSA, the law contains extensive reporting and record-keeping provisions.
Although proper completion of CTRs and SARs can be a full time job, the
customer identification program (CIP) requirements under section 326 of
the USA PATRIOT Act make the compliance burden that much greater.
Final
CIP regulations were released on April 30, 2003, with compliance mandatory
on October 1, 2003. Although your CIP must include a number of components,
the focus of your program should be on the collection of identifying information
and the verification that such information is accurate. The final rules
require customers that open accounts to go through a risk-based identification
process. Information that must be collected at account opening include
the customer’s name, date of birth, address and TIN.
Once identification
information is collected, the customer’s identity must be verified
within a reasonable time after the account is opened. Given the amount
of information to sort through and the relatively short time frame to
verify identity, many institutions are looking to automated identity verification
software programs. Bankers Systems offers a software verification product
called IDFlag™,
which is a risk-based solution designed to verify customer information
quickly and reliably. As the federal government continues its battle to
combat terrorism and fraud, it appears an effective identity verification
system is a necessity.
Beyond policies and
procedures, the BSA regs also require on-going employee training. Since
the BSA impacts all areas of a bank, including commercial lending, consumer
lending, deposit/operations and the mortgage department, it is imperative
that staff training be a priority.
Finally, banks probably
spend more on BSA compliance because of the teeth in the law. The penalties
for violating the BSA are far-reaching. Under the law, a violation can
give rise to regulator enforcement action, civil penalties and criminal
penalties. In addition, individual employees may be held accountable for
BSA violations that are deemed willful.
In light of what is involved in complying with the BSA, it is important
to review your compliance budget in this area. If few dollars are allocated
to BSA compliance, you may want to investigate further. From a risk management
standpoint, the BSA area is hot and certainly needs all the attention
you can afford to give it.
Copyright© of the American Bankers Associtaion
Back
to Top |
