Webinar Slides: Critical Steps to Keep your BSA Program Current

Speaker Firms and Organization:
Atlantic Community Bankers Bank
Nancy E. Lake, CAMS-Audit, CAMS-FCI
Director of Compliance Anchor
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Presented By:
September 14, 2016
1
Partner Firms:
Pentagon Federal Credit Union
Patricia A. Rodriguez-Autore, MS
Senior Manager, BSA/AML Analyst
Pneuron
Simon Moss
CEO and President

September 14, 2016
2
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September 14, 2016
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September 14, 2016
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Sponsor:
September 14, 2016
6
Pneuron’s leading business orchestration software enables organizations to
flexibly leverage their existing applications, infrastructure, services and data
to create and deliver actionable intelligence – in half the time and cost.
Through Pneuron’s innovative, distributed approach, companies are no
longer faced with the complex centralization and integration requirements of
traditional approaches. Pneuron and its patented groundbreaking technology
have garnered numerous awards and recognitions including: Forrester
Breakout Vendor, Inc. 5000 fastest growing private company, MIT Sloan
School CIO Enterprise Innovator Award, 2015 Gartner Cool Vendor, CRN’s
2015 & 2016 Emerging Vendors designation and SD Times Company to
Watch.

Partner Firms:
September 14, 2016
7
Compliance Anchor®, a unit of Atlantic Community Bankers Bank, provides
an online, cost effective training solution which includes topic-specific
webinars and Veterans’ Venues, with a focus on BSA and consumer
compliance. Veterans’ Venues are online webinar/networking events through
which participants are provided the latest regulatory updates including final
and proposed regulations, regulatory issuances, enforcement actions,
specific topic information, other items of interest and industry news. The
phone lines are then opened for discussion and questions. Compliance
Anchor also provides bank training and support to community banks,
remotely or in person based upon the needs of the financial institution.

Brief Speaker Bios:
Simon Moss
Simon Moss is the Chief Executive Officer and Board Member for Pneuron Corporation. In this role, Moss is responsible for
overseeing the management, strategy and operations of the business on a global basis. Under Moss’ leadership, the company was
founded, capitalized and the strategic platform developed, transforming Pneuron into a global technology provider. Simon brings over
20 years of successful strategic leadership as CEO, Partner and Board member in the financial services industry, and has a proven
track record as a successful entrepreneur.
September 14, 2016
8
Nancy Lake has over a decade of experience in the BSA/AML world. Nancy was CAMS certified in 2008, received her CAMS-Audit
certification in 2013, and her CAMS-FCI certification in 2015. She has served as BSA Officer in multiple banks where she successfully
set up the entire BSA program. She has conducted bank wide BSA/AML training including Board of Director training. Nancy has
experience working with or implementing several automated BSA/AML monitoring systems.
► For more information about the speakers, you can visit: https://theknowledgegroup.org/event-homepage/?event_id=2100
Patricia Rodriguez-Autore is currently the Bank Secrecy Act Senior Manager at Pentagon Federal Credit Union where she is
responsible for designing, implementing, and managing all aspects of the AML/BSA/OFAC Program. Prior to PenFed, Patricia was the
Compliance BSA/AML Consultant at O’Conner Law Firm where she executed all Banking related cases pertaining to regulatory and
compliance issues, including BSA/AML/OFAC/USA Patriot Act, Privacy, Information protection and several other consumer
regulations.

Over the past several years the Bank Secrecy Act (BSA) has caused dramatic operational change. There are myriad factors
impacting BSA programs including new and changing products, competitive services, evolving markets and increased
regulatory scrutiny around KYC and money-laundering operations. Added to this market and regulatory pressure, there is
substantial financial scrutiny on the ongoing cost of compliance and the draconian impacts of non-compliance. The BSA
officer is under incredible pressure to protect the organization, stay current and reduce costs. In this Knowledge Group
Section LIVE webcast, a panel of distinguished professionals will help you understand the most critical issues facing the
BSA team which will include:
• Overview of Pressures facing BSA teams
• Snapshot of the current regulatory environment
• Key tips to keep pace with growing volume of alerts, emerging threats and increasing regulation
• Mini-case studies of how several global banks are making change and seeing results
• Advice for regulators to help them help Banks improve their BSA programs
• Live interactive Q&A session
This live webcast will provide BSA Officers, BSA teams and Regulators with a comprehensive overview of the modern-day
BSA program. Attending this course will give you the tools you need to understand how to optimize the BSA program at
your firm. Advanced registration is recommended as space is limited.
September 14, 2016
9

Featured Speakers:
September 14, 2016
10
SEGMENT 1:
Simon Moss
CEO and President
Pneuron
SEGMENT 2:
SEGMENT 3:

Introduction
Simon Moss is the Chief Executive Officer and Board Member for Pneuron Corporation. In this role, Moss is responsible for
overseeing the management, strategy and operations of the business on a global basis. Under Moss’ leadership, the
company was founded, capitalized and the strategic platform developed, transforming Pneuron into a global technology
provider. Simon brings over 20 years of successful strategic leadership as CEO, Partner and Board member in the financial
services industry, and has a proven track record as a successful entrepreneur.
Moss was most recently the CEO of Avistar and served four years with Mantas, moving the company into positive revenue
streams and ultimate acquisition by Oracle Corporation. Previously, he served as Partner at Price Waterhouse Coopers, and
was co-Founder of Risk Management Services Practice at IBM, all rounding out his extensive experience in financial
services, trading and consulting practices. Simon excels in corporate revitalization and developing new go to market
strategies for small emerging businesses as well as Fortune 1000 organizations. Moss is also on the Board of Directors for
C6 Intelligence.
September 14, 2016
11
SEGMENT 1:
Simon Moss
CEO and President
Pneuron

Steps to Keep your BSA Program Current
September 14, 2016
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The Pillars of the BSA Program
September 14, 2016
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KYC
Transaction
Monitoring
FIU
Organizational Governance, Tone from the Top, Ethical Culture
Data Governance
Reporting and Documentation
Global Customer 360 View

KYC
Health Check Metrics (Completeness of Analysis)
 Number of data sources used as part of onboarding risk check
 Number of clients moved to EDD
 Speed and consistency of client onboarding
 Speed of ad hoc customer risk analysis and reporting
September 14, 2016
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Automating access and analysis of multiple
data and information at point of onboarding
offers huge value cost, risk and time value.
This “tipping point” of data is critical for
multiple risk, cost and competitive
advantages.

TMS
Health Check Metrics (Speed and Agility of Deployment)
 Time of development and deployment for new scenarios
 Time to add new variables, new entities and foci on existing scenarios
 Speed of adding new data sources, asset classes, customers or business to existing
scenarios
 Ability of internal team to develop and manage new scenarios.
September 14, 2016
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Accelerating scenario
development/adjustment both in
analytical and data source categories
offers significant regulatory, cost and
risk advantages.
Current: 6 Target: 24
Average annual scenario development and deployment duration (with installed TMS)

FIU
Health Check Metrics (Operational ROI, Consistency and Time of Investigation)
 % of false positives within TMS alert volumes
 Average analysis/investigation time - alerts, cases, SARs
 Average operational cost per alert/case
 Ratio of SARS to alert volume
 Consistency metrics around closed alerts, investigated cases and SARs
September 14, 2016
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Current
Manual Analysis Activities
Volume of Alerts
Analyzed day 1Pre-processing
Start of
Workday
Validation of results and
intelligence
Pre-processing, analysis and
investigation results creation
(25%)
(90%)
Best Practice
Automating investigation
processes, data access, analysis
and investigation into pre-
processing transforms the FIU in
effectiveness, focus and cost.

Reporting and Documentation
Health Check Metrics (Global transparency and agile across all activities, processes and
resources)
 Global dashboards supporting all functions and KPIs
 Consistent reporting baseline for BSA office, regional offices, audit, compliance and risk
committees
 Drill down with appropriate data lineage into identified risks or concerns.
 Integrated metrics across all functions, processes and technologies (KYC, TMS, FIU)
 Agile ability to enquire and analyze based on requests or material events.
September 14, 2016
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Global BSA
Systems

19
Resources
United Nations Office on Drugs and Crime, Money-Laundering and Globalization. .
https://www.unodc.org/unodc/en/money-laundering/globalization.html
National Money Laundering Risk Assessment (2015).
https://www.treasury.gov/resource-center/terrorist-illicit-
finance/Documents/National%20Money%20Laundering%20Risk%20Assessment%20%E2%80%93%2006-12-
2015.pdf
Dow Jones & ACAMS, Global Anti-Money Laundering Survey Results (2016).
http://files.acams.org/pdfs/2016/Dow_Jones_and_ACAMS_Global_Anti-Money_Laundering_Survey_Results_2016.pdf
From Source to Surveillance: The Hidden Risk in AML Monitoring System Optimization (Sept.
2010).
https://www.pwc.com/us/en/anti-money-laundering/publications/assets/aml-monitoring-system-risks.pdf
Anti-Money Laundering Risk Assessment and Customer Due Diligence—A Global Perspective
(June 2013). https://www.lexisnexis.com/risk/downloads/whitepaper/anti-money-laundering-risk-assessment-and-
customer-due-diligence-study.pdf

Introduction
Nancy Lake has over a decade of experience in the BSA/AML world. Nancy was CAMS certified in 2008, received her
CAMS-Audit certification in 2013, and her CAMS-FCI certification in 2015. She has served as BSA Officer in multiple banks
where she successfully set up the entire BSA program. She has conducted bank wide BSA/AML training including Board of
Director training. Nancy has experience working with or implementing several automated BSA/AML monitoring systems.
Nancy joined Atlantic Community Bankers Bank in 2012 to develop a new consulting division, Compliance Anchor. Nancy is
utilizing her BSA experience and 19 years as an educator to provide assistance to community banks in managing risk and
developing sound internal programs and best practices.
September 14, 2016
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SEGMENT 2:

FDIC Consent Order
• 7/19/16 – Community Bank in Illinois with about $326M in assets received a consent order for BSA –
https://www5.fdic.gov/EDOBlob/Mediator.aspx?UniqueID=bd2c985a-fe0c-429b-9e1f-0513b0ffa987
• The standard requirements were mentioned:
– Written BSA Compliance Program (“Specifically, the policy should provide for written, detailed
guidelines regarding the administration of high risk customer relationships, including the
solicitation, opening, and ongoing monitoring of all such accounts for suspicious activity and the
filing of all required reports resulting there from.”)
– BSA Oversight (Specialized training for the BSA Officer)
– Account Monitoring (Specialized training specific to the Bank’s automated account transaction
monitoring system for the Bank’s BSA Officer)
– Look Back Review
September 14, 2016
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SEGMENT 2:

FDIC Consent Order cont.
• Specifics on Account Monitoring
– All core applications interfaced with the transaction monitoring system
– Procedures to ensure timely review of alerts for possible SARs
– Procedures, controls, and delegations of authority for determining when alerts/cases are closed
or evaluated further
– Procedures regarding the minimal level of documentation supporting the decision to close alerts
– Procedures and controls for establishing or making changes to system parameters used by the
system to generate transaction alerts/cases
September 14, 2016
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SEGMENT 2:

OCC Consent Order
• 7/20/16 – Community Bank in Texas with about $212M in assets received a consent order from the
OCC for BSA – http://www.occ.gov/static/enforcement-actions/ea2016-069.pdf
• Staffing was one of the first issues addressed and required:
– The workload of current BSA staff
– The skill sets of current BSA staff
– The levels of experience required to appropriately implement the Bank’s BSA/AML monitoring
tools
• The need for succession planning for the BSA Officer role to ensure continuity of BSA/AML oversight
in the event of employee departures.
• Additional Note on Staffing: “Any BSA staff (employees or consultants) hired pursuant to this Article
shall have an adequate level of experience and expertise to facilitate the Bank in ensuring appropriate
oversight of its BSA/AML program, taking into account the specific BSA/AML risk profile of the Bank,
the technical aspects of its monitoring systems, and the deficiencies noted in the audit and ROE.”
September 14, 2016
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SEGMENT 2:

OCC Consent Order cont.
• The BSA monitoring system was also addressed and required procedures that include:
– An analysis of the filtering thresholds established by the Bank
– Periodic testing and monitoring of thresholds for their appropriateness to the Bank’s customer
base, products, services, and geographic areas
– A requirement that any changes to thresholds are approved at the senior management level and
periodically reported to the Board
– A requirement that documentation of any changes to the thresholds is maintained and available
to auditors and examiners
• The monitoring section also included: “a requirement for independent third party validation of the
models used for the BSA/AML monitoring systems in order to ensure that all accounts and
transactions are captured and that the systems are adequate to detect potentially suspicious activity”
September 14, 2016
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SEGMENT 2:

OCC Consent Order cont.
• The order discussed CDD/EDD and included “policies…should give consideration to FinCEN’s
recently issued regulation on Customer Due Diligence…” and stated that “At a minimum, these
policies and procedures…shall include:
– Baseline documentation requirements and processes to be used for CDD at account opening,
including ACH specific customer and originator due diligence policies, processes, and
procedures per OCC Bulletin 2008-12, Payment Processors Guidance.
– Specification of the EDD information that bank personnel must obtain for higher-risk accounts,
which among other information should include:
September 14, 2016
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SEGMENT 2:
Purpose of Account Source of Funds and Wealth
Individuals with Ownership or
Control
Occupation or Type of
Business
Financial Statements Bank References
Domicile (Where Business is
Organized)
Proximity of Customer’s
Residence, Employment, or
Business to the Bank
Description of the Customer’s
Primary Trade Area (Note
International)
Description of Business
Operations (Vol. of Sales,
Customers, Suppliers)
Explanations for Changes in
Account Activity

NY Fines Mega Bank $180M
• 8/19/16 – NY Department of Financial Services (DFS) Press Release: “DFS Fines Mega Bank $180M
for Violating AML Laws” – http://www.dfs.ny.gov/about/press/pr1608191.htm
• Mega International Commercial Bank of Taiwan is a major international financial institution with
approximately $103B in assets, including $9B at its New York branch.
• “The compliance failures that DFS found at the New York Branch of Mega Bank are serious,
persistent and affected the entire Mega banking enterprise and they indicate a fundamental lack of
understanding of the need for a vigorous compliance infrastructure. DFS's recent examination
uncovered that Mega Bank's compliance program was a hollow shell, and this consent order is
necessary to ensure future compliance.”
September 14, 2016
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SEGMENT 2:

NY Fines Mega Bank $180M cont.
• The findings of the DFS included:
– The BSA/AML officer for the New York branch, who was based at the bank’s Taiwan
headquarters, and the branch’s chief compliance officer both lacked familiarity with U.S.
regulatory requirements. In addition, the chief compliance offer had conflicted interests because
she had key business and operational responsibilities, along with her compliance role.
– Compliance staff at both the head office and branch failed to periodically review surveillance
monitoring filter criteria designed to detect suspicious transactions. Also, numerous documents
relied upon in transaction monitoring were not translated to English from Chinese, precluding
effective examination by regulators.
– The New York branch procedures provided virtually no guidance concerning the reporting of
continuing suspicious activities; had inconsistent compliance policies; and failed to determine
whether foreign affiliates had in place adequate AML controls.
• In the consent order it is specifically noted that Mega Bank had a “Troubling and Dismissive Response
to the DFS Examination”
September 14, 2016
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SEGMENT 2:

Definition and Types
Includes:
• Trafficking of organs
• Trafficking of people for forced labor
• Child soldiering (think ISIS)
• Trafficking of people for sexual exploitation
• Commercial sex exploitation of children in tourism
September 14, 2016
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SEGMENT 2:

Monies Involved
• Most recent figure (May 20, 2014) based on data from an International Labour Organization study in
2012 = $150 billion
http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_243201/lang--it/index.htm
 Consider the global sports market (including all ticket sales, merchandise, etc.) which generated $146
billion in 2014
 According to the 2012 study, $150 billion is split as follows:
– $99 billion = commercial sexual exploitation
– $34B in construction, manufacturing, mining and utilities;
– $9B in agriculture, including forestry and fishing;
– $8B saved by private households by not paying or underpaying domestic workers held in forced
labor
September 14, 2016
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SEGMENT 2:

Overseas
• Taliban pays $7,000 - $14,000 for children as young as seven years old to use them as suicide
bombers
• Top 10 countries for human trafficking account for 71% of the estimated 21 million people trafficked
globally each year
• Included in the top 10 countries are:
– India
– Pakistan
– Democratic Republic of the Congo
– Central African Republic
September 14, 2016
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SEGMENT 2:

United States
• Lincoln signed the Emancipation Proclamation in 1863 and the 13th Amendment formally abolished
slavery almost 150 years ago, yet slavery continues today in the form of human trafficking
• Human Trafficking exists in all 50 states
• U.S. = a source and transit country for human trafficking
• U.S. – considered one of the top destination points for victims of child trafficking and exploitation
September 14, 2016
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SEGMENT 2:

Sex Workers vs. Sex Trafficking
• Key = Voluntary or Not Voluntary
• Sex Workers – Individuals who choose to be in the lifestyle
• Sex Trafficking – Individuals who do not choose to be in the sex industry and/or cannot leave because
of force, fraud or coercion.
Follow the money – if an individual suspected of prostitution has a bank account with a balance and
unrestricted access to the funds, they are more likely to be a sex worker and not a victim of human
trafficking.
September 14, 2016
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SEGMENT 2:

Brianna – The Girl Next Door
• Good girl, good home, great student (two years of college in H.S.)
• From a small town in the state 0f Washington
• Older guy came into the coffee shop where she worked
• Brought in younger guys – “coincidentally” she had lots in common with the younger guys
• Developed a friendship over long period of time
• Convinced her to visit them at their house
– Big, beautiful Victorian home with nice cars and lots of money
– Invited her to spend the night - nothing bad happened
– Convinced her to move out of her home and in with them
– Invited her to go to Arizona for Christmas
• Asked friend to help her move out – he told his dad who had just had human trafficking training – led
to her rescue (had already been sold to a pimp in Arizona)
September 14, 2016
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SEGMENT 2:

Sobering Statistics
• American girls and boys are being stalked by traffickers
• Typical places include Facebook, movie theatres, parks, bowling alleys, after school activities,
orphanages, malls
• Traffickers want younger and younger children - average age of entry into sexual exploitation
– Boys = 11-13
– Girls = 12-14
• 300,000 – 400,000 American children each year
• Average life expectancy of a child once forced into slavery is only seven years
September 14, 2016
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SEGMENT 2:

Demand and Supply
• As long as there are people demanding services, there will be traffickers supplying the demand!
• Contributing Factors
– Porn industry – generated $13 billion in 2006 alone
– Entertainment industry with sexually explicit movies
• 50 Shades of Grey (displays sexual dominance over women)
• Generated $81.6 million in its opening three days
– Explosion of the Internet – buyers and sellers connect in minutes
– Money – 2003 study found that a sex slave can earn at least $250,000 for her pimp each year
• It will take more than governments, private organizations, citizens and law enforcement to fight this
problem, financial institutions must get involved!
September 14, 2016
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SEGMENT 2:

Case Study Red Flags
• Both businesses were in the cleaning industry
• Both had an Any Town, MAR address, but Articles of Incorporation were in FL
• Both addresses on the Articles of Incorporation were to a United Parcel Service location
• Always Clean Inc. stated they opened their account in Any Town, MAR as a second operating
location. Simply Clean Inc. indicated they opened their account in Any Town, MAR based on a referral
from a friend who said it was a good area to do business
• After Always Clean Inc. accounts were closed by Bank #1, they opened accounts at Bank #2. Simply
Clean Inc. brought their accounts to Bank #1 from Bank #2
• Both businesses had addresses in the same apartment complex next to each other
September 14, 2016
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SEGMENT 2:

Case Study Red Flags cont.
• Alternate addresses in the same apartment complex for both businesses were one street away from
the primary addresses
• Both businesses had numerous rentals in the same apartment complex
• Man #1 was paid by Lady#1 via a check from Bank #2
• Both businesses had rent payments to numerous cities in MAR
• Simply Clean Inc.’s account was funded in 2013 by check deposits from Always Clean Inc. and two
hotels
• Always Clean Inc. regularly funded their accounts with check deposits from Simply Clean Inc.’s
account and the same two hotels
• Both businesses wrote checks to four of the exact same individuals for similar amounts
• At no point did the customer make debit payments that appear to be going toward business expenses
for janitorial/cleaning company
September 14, 2016
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SEGMENT 2:

Increase Your Awareness
• Be aware of the scope of human trafficking within your own footprint
• Search the internet
– Organizations fighting human trafficking
– Human Trafficking 101 for School Administrators and Staff -
http://www.dhs.gov/sites/default/files/publications/blue-campaign/Blue%20Campaign%20-
%20Human%20Trafficking%20101%20for%20School%20Administrators%20and%20Staff.pdf
– National Human Trafficking Resource Center (NHTRC) – Information by state:
http://www.traffickingresourcecenter.org/states
– Report Card for your state - http://sharedhope.org/what-we-do/bring-justice/reportcards/
• Read some books
– Hidden Girl – story of Shyima Hall –New York: Simon & Schuster, 2014
– Renting Lucy by Linda Smith - Vancouver: Shared Hope International, 2013
September 14, 2016
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SEGMENT 2:

Train Your Team
Red Flags for Tellers and Branch Personnel
• Round dollar payroll checks being cashed by ladies scantily dressed and accompanied by a man
• The same ladies presenting foreign ID cards including international drivers’ licenses and valid
passports with no visa or an expired visa, or even a student ID
• Evidence of being controlled
• Bruises or other signs of physical abuse
• Fear or depression
• Not speaking on his/her own behalf and/or non-English speaking
• Third party escorting the customer may always have possession of the customer’s ID
Red Flags for Account Opening Personnel
• Be aware of business types that are prone to human trafficking such as hotels, restaurants, truck
stops, cleaning/janitorial services, massage parlors, nail salons, etc.
September 14, 2016
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SEGMENT 2:

Train Your Team cont.
Red Flags for Account Opening Personnel cont.
• Articles of Incorporation from other states, such as Florida, California, New York, Nevada or others
known as major trafficking states
• Addresses for businesses being a P.O. Box or the physical address of a postal store often found in a
strip mall
• Inconsistent dates between ID and business documentation (their ID indicates they lived in your state
for several years, but the business physical address was another state for the same period of time)
• Address of the business is in an apartment complex
• Multiple unrelated people living at the same address
• Common signer(s)/custodian(s) in apparently unrelated business and/or personal accounts.
• Common information (address, phone number, employment information, etc.) used to open multiple
accounts in different names
September 14, 2016
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SEGMENT 2:

Red Flags for BSA/AML Personnel
• Rent payments for multiple locations within apartment complexes
• Rent payments made by unrelated business types (example: a cleaning business paying rent for
several apartments)
• New businesses making tons of money overnight
• Round dollar payroll checks being cashed
• ACH credits received from an international trading site for imports/exports
• Wires and/or frequent travel to countries known as human trafficking hot spots
• Multiple phone carriers (numbers on ads need to be changed regularly)
September 14, 2016
41
SEGMENT 2:

Red Flags for Check Card Debits
• From an airline and/or moving company
• For rent payments for related things involving trafficking such as gas, beer/liquor, restaurants, casinos,
a gentleman’s club, etc.
• Occurring in various cities over a short period of time such as a month
Red Flags for Prepaid and Credit Cards
• Multiple expenditures on websites like the ones listed on the next slide and followed by hotel spending
• Travel out of state and multiple hotel expenses
• Multiple payments for internet ad sites – Escort ads posted online do not obviously state that sex with
children is being sold, so code words are used
September 14, 2016
42
SEGMENT 2:

Code Words/Websites
• Code Words
• Websites
– benaughty.com
– backpage.com
– girlsdateforfree.com
September 14, 2016
43
SEGMENT 2:

Individually
• Communicate the signs of human trafficking to your family and friends
– Scripted answers
– Inconsistent in story
– Branding or tattoos, especially those reflecting ownership or money
– Signs of physical abuse
– Appears helpless, shamed, nervous
– Malnourished
– Inability or fear to make eye contact
– Chronic runaway; homeless youth
– Dating much older, abusive or controlling man
– Not attending school or numerous school absences
– Sudden change in attire, possessions, behavior
– Travels to other cities frequently
– Uses terms common to the commercial sex industry
September 14, 2016
44
SEGMENT 2:

Importance of CDD/EDD Documentation
• Why Document?
– Saves you time – SARs, account reviews, audits, exams, etc.
– Expected by auditors and examiners
– Protects you as a BSA Officer
– Legal recourse
• What to Document – Everything!
– Transactions
– 314b contacts
– Google searches – with screen shots
– Documents – deeds, trusts, loan documents, etc.
– Communications with bank staff and/or the customer
• How to Document
– Name/DOB or CIF # in case of duplicate names
– Type of Record – CDD/EDD/SAR/Subpoena/etc.
– Date
September 14, 2016
45
SEGMENT 2:

Introduction
Patricia Rodriguez-Autore is currently the Bank Secrecy Act Senior Manager at Pentagon Federal Credit Union where she is
responsible for designing, implementing, and managing all aspects of the AML/BSA/OFAC Program. Prior to PenFed,
Patricia was the Compliance BSA/AML Consultant at O’Conner Law Firm where she executed all Banking related cases
pertaining to regulatory and compliance issues, including BSA/AML/OFAC/USA Patriot Act, Privacy, Information protection
and several other consumer regulations.
Patricia is an expert within the financial crimes industry, supported by extensive knowledge of domestic and international
compliance policies, procedures and risk assessments related to AML/BSA/OFAC/KYC, fraud and suspicious activity
detection and monitoring.
September 14, 2016
46
SEGMENT 3:

BSA/AML Bank Secrecy Act Training
September 14, 2016
47
SEGMENT 3:

Why Are You Here ?
• Expand your knowledge of AML/BSA, Which will
• Increase understanding of links in your Business Lines/Areas to the AML requirements, Which will
• Raise AML awareness in the Bank, Which will
• Build a partnership with the AML Department,Which will
• Ensure an effective AML/BSA Program, Which will
• Protect the Bank from unwittingly being used to launder money or fund terrorist activity.
September 14, 2016
48
SEGMENT 3:

What Will You Leave With..
• Understanding of:
– AML/BSA/OFAC Requirements
– Importance of Knowing Your Customer
• Recognition that every Bank employee has a key role in Solving the AML Puzzle
• Familiarization with Money Laundering Schemes
• Insight into Terrorist Financing
• Comprehension of the Legislative Histories
September 14, 2016
49
SEGMENT 3:

Mandate
“Banking organizations must develop, implement and maintain effective AML programs that
address the ever-changing strategies of money launderers and terrorists who attempt to gain
access to the U.S. financial system.”
Source: Federal Financial Institutions Examination Council’s Manual for Examination of AML/BSA
(FFIEC)
September 14, 2016
50
SEGMENT 3:

AML/BSA PROGRAM Requirements
Internal policies, procedures, and controls designed to ensure compliance with the reporting and record-
keeping requirements of the BSA
Board Approval of the Program
Designation of an AML Officer
Transaction monitoring
Maintenance of an ongoing employee training program and
An independent audit function to test the adequacy of the program
September 14, 2016
51
SEGMENT 3:

AML/BSA PROGRAM Requirements
Identification of Customers (CIP)
Currency transaction reporting (CTRs)
Recording of monetary instrument sales
Maintaining exemption records (CTR exemption)
Identification, escalation and reporting of suspicious activity or behavior (SARs)
AML Risk Assessment and Internal controls
September 14, 2016
52
SEGMENT 3:

OFAC REQUIREMENTS Office of Foreign Assets Control
1. Block or prohibit transactions with designated foreign countries, groups or individuals
2. List of entities administered through Treasury Department
3. Applies to all individuals, businesses and entities
September 14, 2016
53
SEGMENT 3:

Money Laundering Definition
Money laundering is the process of conducting financial transactions and/or taking the proceeds from an
illegal activity and
Making them appear to be from a legal source, or
Hiding them or placing them beyond the reach of the government, or
Utilizing a series of transactions, transferring the proceeds to a Bank Secrecy Act country and later
returning those funds to their original source
September 14, 2016
54
SEGMENT 3:

In other words, the Bad Guy is trying to:
• Disguise the source
• Change the form
• Move the funds to a place where they are less likely to
attract attention
September 14, 2016
55
SEGMENT 3:

Samples of Illegal Activities(Not limited to these)
Narcotics Trafficking
Gambling/Loan Sharking/Racketeering
Bank Fraud, Bankruptcy Fraud
Contraband Smuggling
Embezzlement
Terrorist Organization Funding
Bribery/Public Corruption
Corporate Kickback Schemes
Espionage
Access Device Fraud/Identity Theft
Health Care Fraud
Income Tax Evasion
September 14, 2016
56
SEGMENT 3:

Money Laundering Steps
1. Placement
2. Layering
3. Integration
At which steps will a launderer attempt to use the Bank?
ALL 3
September 14, 2016
57
SEGMENT 3:

Placement Step Examples
Initial placement into the financial system might be done by:
Exchanging small bills for larger ones
Breaking up large sums of money into less conspicuous smaller sums to be deposited
Purchasing a series of money instruments (MO, travelers cheques), then depositing into an account in
another location
Physically carrying the money out of the United States
September 14, 2016
58
SEGMENT 3:

Layering Step Examples
In this phase, a series of conversions or movements take
place to distance the funds from the original source:
This can be done by wiring funds through a series of domestic accounts
This can be done through the purchase and sale of investments in nominee businesses and/or individual
names
This can be done by wiring funds to various accounts throughout the globe, OR by disguising the
transfers as payments for goods and services
September 14, 2016
59
SEGMENT 3:

Integration Step Examples
The money has been laundered and is now integrated into the legitimate economy
 The bad guy/gal then may choose to invest in real estate, luxury assets or even business ventures with
little fear of detection
September 14, 2016
60
SEGMENT 3:

How It Works
September 14, 2016
61
SEGMENT 3:

Terrorist Financing Defined
 Terrorist financing is the funding of terrorist activities, ideologies and operations.
 The financing of terrorist activities can be accomplished through both unlawful and legitimate sources.
 The motivation between money laundering and terrorist financing may differ; however, the actual
methods used to fund terrorist operations can be similar to a launderer.
September 14, 2016
62
SEGMENT 3:

CUSTOMER IDENTIFICATION PROGRAM (CIP)
Written CIP
Risk Based procedures for verifying the identity of each customer
Account Opening Procedures:
•Name
•DOB
•Address
•TIN
Verification Procedures for both Individuals and Businesses
Record Retention Procedures for the identification obtained
Notice to the customer
September 14, 2016
63
SEGMENT 3:

Know Your Customer / Customer Due Diligence
In addition to required CIP, customer
due diligence is required to ensure
that a financial institution “knows
its customers” and performs “due diligence”
Risk-based approach that considers the account type, transactions and customer:
• Account Opening questions and documentation
• Verification of Source of wealth/funds
• Verification of information
-Web page, public records, credit bureaus, telephone directories, reverse directories,
credit reports, Lexis Nexis, etc.
• Customer Risk Rating
• Enhanced Due Diligence for High Risk Customers
September 14, 2016
64
SEGMENT 3:

High Risk Customer Categories
• Non Resident Aliens (NRAs)
• Foreign Mailing Address Customers
• Money Service Businesses (MSBs)
• Check Cashers
• ATM Business Operators
• Importers/Exporters
• Politically Exposed Persons (PEPs)
• Foreign Embassies/Consulates
• Uncommon Charitable Organizations
• Cash Intensive Businesses (gas stations, restaurants, convenience stores,
vending machine operators, etc.)
• Remote Deposit Capture Customers
• Foreign Banks
• Customers on whom SARs were previously filed
• Customers whose records were subpoenaed in a criminal matter
September 14, 2016
65
SEGMENT 3:

Enhanced Due Diligence Function AML/BSA Department
• High Risk Account Identification, Investigation and Monitoring
• Interact with the Bank’s Business Lines and Departments
• Utilize Various Sources of Information
• Contact with Customers
• Contact with Law Enforcement
• Contact with Other Financial Institutions
September 14, 2016
66
SEGMENT 3:

SAR Filing Criteria/Conditions
Banks must file on transactions suspected to be linked to criminal or BSA
violations which involve but not limited to…
Illegal proceeds
Evading BSA Requirements
Unusual activity with no known legitimate explanation
Funds used to facilitate criminal activity

September 14, 2016
67
SEGMENT 3:

Currency Transaction Reporting (CTR) Requirements
The Bank must report all currency transactions in excess of $10,000 either conducted by the same person
in one day or on behalf of the same person in one day
• Deposits
• Withdrawals
• Exchanges
• Multiple transactions
September 14, 2016
68
SEGMENT 3:

Travel Rule Wire Transfers
• Funds transfer - $3,000 or more originated, received, or intermediary form
• Record-keeping requirement depends upon role in the transfer
– Originators – Original or copy of the payment order, name and address of originator,
amount, execution date, payment instructions, ID of beneficiary
– Intermediary – Original or copy of the payment order
– Beneficiary – Original or copy of the payment order, name, and address of beneficiary, ID
of person receiving proceeds if not beneficiary, copy of the check or instrument used to
effect payment
September 14, 2016
69
SEGMENT 3:

Financial Transactions Used to Launder
Money launderers take full advantage of the existing financial products and services available within
financial institutions. Therefore, any type of transaction is susceptible and has been used for money
laundering:
 Deposits
 Withdrawals
 Insurance Payments
 Loan Payments
 Wire Transfers
 ATM Transactions
 Remote Deposits
 Online Transactions
 ACH Transactions
 Bank Checks
 Stored Value Cards
 Securities Transactions, etc.
September 14, 2016
70
SEGMENT 3:

September 14, 2016
71
Contact Info:
Simon Moss
CEO and President
Pneuron
E: Simon.Moss@pneuron.com
T: (203) 918-4234
E: Patricia.Rodriguez-Autore@penfed.org
T: (571) 329-5003
E: nlake@acbb.com
T: (717) 303-7854

► You may ask a question at anytime throughout the presentation today. Simply click on the question mark icon located on the floating tool bar on the bottom right side of your screen. Type
your question in the box that appears and click send.
► Questions will be answered in the order they are received.
Q&A:
September 14, 2016
72
SEGMENT 1:
Simon Moss
CEO and President
Pneuron
SEGMENT 2:
SEGMENT 3:

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