Bank Secrecy Act |
EXAMINATION PROCEDURES
Funds Transfers
Objective. Assess the adequacy of the bank’s systems to manage the risks associated with funds transfers, and management’s ability to implement effective monitoring and reporting systems. This section expands the core review of the statutory and regulatory requirements of funds transfers to provide a broader assessment of AML risks associated with this activity.
1. Review the policies, procedures, and processes related to funds transfers. Evaluate the adequacy of the policies, procedures, and processes given the bank’s funds transfer activities and the risks they present. Assess whether the controls are adequate to reasonably protect the bank from money laundering and terrorist financing.
2. From review of management information systems (MIS) and internal risk rating factors, determine whether the bank effectively identifies and monitors funds transfer activities. 3. Evaluate the bank’s risks related to funds transfer activities by analyzing the frequency and dollar volume of funds transfers in relation to the bank’s size, its location, and the nature of its customer account relationships.
4. Determine whether an audit trail of funds transfer activities exists. Determine whether an adequate separation of duties or other compensating controls are in place to ensure proper authorization for sending and receiving funds transfers and for correcting postings to accounts.
5. Determine whether the bank’s system for monitoring funds transfers suspicious activities, and for reporting of suspicious activities, is adequate given the bank’s size, complexity, location, and types of customer relationships. Determine whether suspicious activity monitoring and reporting systems include:
- Funds transfers purchased with currency.
- Transactions in which the bank is acting as an intermediary.
- Transactions in which the bank is originating or receiving funds transfers from foreign financial institutions, particularly to or from jurisdictions with strict privacy and secrecy laws or those identified as high risk.
- Frequent currency deposits and subsequent transfers, particularly to a larger institution or out of the country.
6. Determine the bank’s procedures for payable upon proper identification (PUPID) transactions.
- Beneficiary bank — determine how the bank disburses the proceeds (i.e., by currency or official check).
- Originating bank — determine whether the bank allows PUPID funds transfers for noncustomers. If so, determine the type of funds accepted (i.e., by currency or official check).
7. If appropriate, refer to the core examination procedures, "Office of Foreign Assets
Control," page 146, for guidance.
Transaction Testing
8. On the basis of the bank’s risk assessment of funds transfer activities, as well as prior examination and audit reports, select a sample of high-risk funds transfer activities, which may include the following:
- Funds transfers purchased with currency.
- Transactions in which the bank is acting as an intermediary.
- Transactions in which the bank is originating or receiving funds transfers from foreign financial institutions, particularly to or from jurisdictions with strict privacy and secrecy laws or those identified as high risk.
- PUPID transactions.
9. From the sample selected, analyze funds transfers to determine whether the amounts, frequency, and jurisdictions of origin or destination are consistent with the nature of the business or occupation of the customer. Identify any suspicious or unusual activity.
10. On the basis of examination procedures completed, including transaction testing, form a conclusion about the adequacy of policies, procedures, and processes associated with funds transfer activity.
