August has been a busy month for Bank Secrecy Act/Anti-Money Laundering (BSA/AML) guidance from federal regulators. First, FinCEN issued guidance about customer due diligence (CDD) requirements in the form of three additional frequently asked questions (FAQs). The FAQs clarified FinCEN’s expectations about obtaining customer information, developing a customer risk profile and updating customer information due to monitoring of the customer relationship. Then the National Credit Union Administration (NCUA) and the other federal banking regulators issued a joint statement explaining the types of BSA/AML violations that might result in a cease and desist order. The Federal Deposit Insurance Act and the Federal Credit Union Act both require the issuance of a cease and desist order if a supervised institution fails to implement a BSA/AML compliance program or fails to correct a problem with the institution’s BSA/AML compliance program after a failure is identified in an examination report or some other written document submitted to an institution’s board or management. Shortly thereafter, FinCEN issued a statement describing its enforcement approach to BSA violations. The statement identified six potential outcomes when FinCEN identifies a BSA violation: taking no action, issuing a warning letter, seeking injunctive relief, settlements, civil money penalties and referrals for criminal prosecution. And on August 21, NCUA, the Federal Reserve Board, the Federal Deposit Insurance Corporation, FinCEN and the Office of the Comptroller of the Currency issued a joint statement explaining CDD requirements for politically exposed persons (PEPs). Today’s blog will examine the agencies’ guidance regarding CDD for PEPs.
The Federal Financial Institutions Examination Council (FFIEC) BSA/AML Examination Manual identifies the implementation of proper CDD policies, procedures and processes as part of the foundation of a strong BSA/AML compliance program. The manual indicates that FinCEN’s BSA regulations require credit unions to establish risk-based CDD procedures that do the following:
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