CHICAGO – State regulators and credit union representatives attending the NASCUS Annual Conference got some sobering news from a Bank Secrecy Act legal expert. “FinCEN is going to make an example out of a credit union to wake the credit union industry up to the importance of being BSA compliant,” warned Carol Van Cleef, a partner in the Washington, D.C.-office of international law firm Bryan Cave LLP where she heads the firm’s anti-money laundering compliance and money services businesses practicing teams. “Riggs Bank is a lesson for every organization to learn from,” she added, referring to the investigation begun in May 2003 by the Office of the Comptroller of the Currency of Riggs for failing to properly police suspicious transactions. That investigation eventually shuttered Riggs – it was merged into PNC Bank. In addition, in Jan. 2005, Riggs agreed to pay the Justice Department $16 million to settle a money laundering criminal investigation involving Chilean dictator Augusto Pinochet. Van Cleef spoke on “BSA Compliance – Getting it Right” and was joined by Jeffrey Pratt, Senior Regulatory Specialist with the Financial Crimes Enforcement Network (FinCEN) and NASCUS’ Brian Knight. Knight, VP of Regulatory Affairs, emphasized that when it comes to BSA, “there are a lot of gray areas. A process is taking place where everyone is trying to get on to the same page.” Another important thing to remember about BSA, he added, is “it applies across the board. When you look at money laundering compliance, you have to look at it from the perspective of you really don’t know who your member or customer is. The days of `I know Sue or John’ are gone.” Both Van Cleef and Pratt echoed Knight, and each emphasized that “there is no small institution exclusion, there is no credit union exclusion from BSA. Larger financial institutions have more resources for compliance, and smaller ones will be strapped to find ways. But they have to have a program in place.” Of course BSA is not new and was around before 9/11, it just wasn’t strictly enforced. But that’s history now. “BSA was glossed over for a long time, but no longer. All financial institutions have to have programs in place,” said Van Cleef, adding that, “Financial institutions have their job to do, and money launderers have their job to do. They’ll be looking for the weak link in the system.” “Credit unions don’t want to be known as the financial institutions that allow money launderers to abuse their relationships with their members,” she said. When thinking about BSA compliance, advises Van Cleef, “you have to ask yourself who is the audience you’re playing to. The audience is law enforcement, not the regulator, and when you look at what law enforcement can do to an organization you need to focus on that.” According to Van Cleef, law enforcement is looking for a pattern within institutions and across industries. When setting up a BSA compliance program, “attitude counts,” said Van Cleef. “A compliance culture that’s established sets the tone from the top,” she explained, “and the tone has to be set at all levels. Don’t blame the BSA compliance officer if the message about compliance hasn’t gotten through. Also don’t blame them if they say something has to be done. If they say so, then it needs to be done.” Pratt underscored Van Cleef’s point by offering this: “If you’re not looking for suspicious activity or don’t know how to look for it, you’re not going to find it.” He also emphasized that he was not trying to tell credit unions not to offer members innovative and risky products. “But if credit unions get involved with risky products, then they have to have controls in place to mitigate those risks, they have to have policies and systems. My concern is that credit unions are going into unchartered territories without having those controls,” said Pratt. -

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