Due diligence "focusing excessively on geography"
Due diligence and monitoring are two areas where examiners are finding problems in compliance with Patriot Act section 312.
When it comes to due diligence, institutions are "focusing excessively on geography," said Bridget Neill, manager of AML policy and compliance for the U.S. Federal Reserve, in yesterday's closing panel. Neill urged institutions to focus not only on where a correspondent bank is but on its ownership structure and nature of products. When monitoring, Neill said, some institutions are not necessarily tracking all activity of correspondents.
William D. Langford, associate director of the Financial Crimes Enforcement Network (FinCEN), said the agency's goal in issuing the final rule was to take what was given to them by the statute and make it fit into what financial institutions already know how to do, such as scoring risk.
"We view this as the platform to address more specific areas," said Langford, adding that FinCEN plans to issue frequently asked questions and other guidance addressing elements of the rule.
Jane Simmons, AML compliance officer correspondent banking at Scotia Bank in Toronto, shared her views on how to achieve compliance. First, institutions should centralize management of foreign institutions in one department that has ownership of the customer base and assumes responsibility for its management. Secondly, institutions' policies and procedures must reflect their culture. And finally, develop a control program to review policies and procedures. Simmons said policies and procedures should be adaptive to change as risks change and so does an institutions' appetite for a certain type of customer.
In regards to the proposal for the enhanced due diligence portion of 312, it seems like FinCEN did a pretty good job with the proposal. A group of major financial associations, including the American Bankers Association, Securities Industry Association and Swiss Bankers Association, discussed the risk-based approach in the rule, specific elements of enhanced due diligence, the term enhanced due diligence and the estimated burden of the proposed requirements. But there wasn't a whole lot of contention regarding the proposed rule, according to Dan Soto, chief compliance officer at RBC Centura in North Carolina.
Areas of debate included when an institution should be considered risky and the term "nested" in the rule. The term "in itself shouldn't be a bad thing," said Soto. Also, the estimated time burden in the rule was of one hour. That estimate is unreasonable, said Soto. "It takes much less time than that," he joked.
When it comes to due diligence, institutions are "focusing excessively on geography," said Bridget Neill, manager of AML policy and compliance for the U.S. Federal Reserve, in yesterday's closing panel. Neill urged institutions to focus not only on where a correspondent bank is but on its ownership structure and nature of products. When monitoring, Neill said, some institutions are not necessarily tracking all activity of correspondents.
William D. Langford, associate director of the Financial Crimes Enforcement Network (FinCEN), said the agency's goal in issuing the final rule was to take what was given to them by the statute and make it fit into what financial institutions already know how to do, such as scoring risk.
"We view this as the platform to address more specific areas," said Langford, adding that FinCEN plans to issue frequently asked questions and other guidance addressing elements of the rule.
Jane Simmons, AML compliance officer correspondent banking at Scotia Bank in Toronto, shared her views on how to achieve compliance. First, institutions should centralize management of foreign institutions in one department that has ownership of the customer base and assumes responsibility for its management. Secondly, institutions' policies and procedures must reflect their culture. And finally, develop a control program to review policies and procedures. Simmons said policies and procedures should be adaptive to change as risks change and so does an institutions' appetite for a certain type of customer.
In regards to the proposal for the enhanced due diligence portion of 312, it seems like FinCEN did a pretty good job with the proposal. A group of major financial associations, including the American Bankers Association, Securities Industry Association and Swiss Bankers Association, discussed the risk-based approach in the rule, specific elements of enhanced due diligence, the term enhanced due diligence and the estimated burden of the proposed requirements. But there wasn't a whole lot of contention regarding the proposed rule, according to Dan Soto, chief compliance officer at RBC Centura in North Carolina.
Areas of debate included when an institution should be considered risky and the term "nested" in the rule. The term "in itself shouldn't be a bad thing," said Soto. Also, the estimated time burden in the rule was of one hour. That estimate is unreasonable, said Soto. "It takes much less time than that," he joked.
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