Anti-Money Laundering Exam Manual Revised

These revisions were made by the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Conference of State Bank Supervisors in collaboration with FinCEN, the administrator of the BSA. The Office of Foreign Assets Control (OFAC) collaborated on the revisions made to the section that addresses compliance with economic and trade sanctions administered and enforced by OFAC.

See Also: Preparing an Omnichannel Anti-Fraud Strategy

These revisions will also help examiners increase their knowledge and experience in detecting money laundering. Precise estimates don't exist for the amount of money that is laundered worldwide every year, but the International Monetary Fund estimates the figure at between $590 billion and $1.5 trillion - 2 to 5 percent of the entire global gross domestic product.

AML compliance expert Sepidah Behram, the AML compliance counsel at the American Bankers Association, outlines some of the new provisions made for MSBs and other non-bank financial institutions:

Note: MSBs can include any non-bank financial institution such as check cashing stores (or small merchants who offer check cashing); merchants who offer stored value cards; gift cards and pre-paid cards; Western Union-type money transfer companies or other types of funds transfer businesses; and, finally, casinos and related gambling establishments.

This year's guidance includes points for examiners to follow when examining an institution's MSBs. It mimics the examination manual, identifies where they should look in the MSB's core foundation and how to assess risk.

"Not all MSBs are high-risk," Behram says. "That's where the anticipated fear came that made many institutions avoid adding MSB-type services into their product lines."

Now the examiners and regulatory bodies have identified the high risk areas, she says. (See BSA/AML Examination Manual) The manual lists ways to mitigate risk.

"There could actually be areas of MSBs that could be taken (with the proper action) that would help moderate high risk into medium or even low risk category," Behram says.

Institutions still need to go through the risk assessment and perform risk mitigation, and there is a level of due diligence expectations of financial institutions. Behram says this was always an issue that was a question for institutions, "How much due diligence is needed on the MSB? This is an area where financial institutions have always struggled with."

Institutions will still need to obtain the MSB's AML program and review it against their established AML program, "Compare it as to how much risk the MSB's services present to your established risk levels."

The revised AML/BAS exam manual lays out that banks are not meant to be "de facto" regulators, Behram concludes. "In fact, the MSBs should be governed and regulated by the state or the IRS, or their regulatory body. This is pretty significant; institutions have carried around with them the need to perform additional due diligence on MSBs and their accounts."