FFIEC BSA AML Assessing Compliance with BSA Regulatory Requirements Customer Due Diligence

This information will determine the best way to monitor transactions, validate identities, and file suspicious activity reports. The requirement for ongoing monitoring of the customer relationship
reflects existing practices established to identify and report suspicious
transactions and, on a risk basis, to maintain and update customer
information. Although having a risk assessment is not a legal requirement, regulators expect financial organizations to have one documented. The Federal Financial Institutions Examination Council (FFIEC) manual provides general guidance on developing and updating a BSA/AML and OFAC risk assessment for financial organizations.

So, while product risk is an important factor to consider, so too are behavioral variables. Evidence shows that customers with deeper banking relationships tend to be lower risk, which means customers with a checking account as well as other products are less likely to be high risk. Connecting the insights from transaction-monitoring models with customer risk-rating models can significantly improve the effectiveness of the latter.

Why Complete an AML Risk Assessment?

Our globally standardized methodology validates scoring decisions, provides data and narratives on internal AML controls, and measures the effectiveness of control programs. Controls and control effectiveness evaluations are mapped against best practices and guidance from global authoritative sources, paving the way for better https://www.xcritical.com/ standards. Risk assessment also helps identify the institution’s inherent risk and assesses the effectiveness of its ML preventive and detective controls. Creating an AML compliance program procedure is essential, but it doesn’t have to be difficult. Jumio’s AML solutions can quickly help you construct an effective risk assessment methodology that is cost-efficient and easy to implement.

AML Risk Assessment

Risk assessment is at the core of every anti-money laundering (AML) decision, influencing AML policies and procedures across your institution. There is a lot of good information available to help you create your https://www.xcritical.com/blog/aml-risk-assessments-what-are-they-and-why-they-matter/ risk assessment. Certain transactions must be verified for OFAC compliance, like ACH and wire transfers. Using the example from above, international wire transfers would be considered high inherent risk, or a 3.


This understanding may be based on assessments of
individual customers or on categories of customers. Determine the adequacy of the bank’s BSA/AML risk assessment process, and determine whether the bank has adequately identified the ML/TF and other illicit financial activity risks within its banking operations. The list of possible model inputs is long, and many on the list are highly correlated and correspond to risk in varying degrees. Feature-selection algorithms that are assumption-free can review thousands of potential model inputs to help identify the most relevant features, while variable clustering can remove redundant model inputs. In addition, machine-learning approaches can build competitive benchmark models to test model accuracy, and, as mentioned above, they can help fix data-quality issues. Another key part of the AML rules requires firms to identify and report any «suspicious activity» that may indicate potential money-laundering problems.

In other words, you need to complete AML risk assessments to comply with the regulations and to protect your organization and staff from the threat of money laundering and other financial crimes. Central to the customer AML risk assessment is a risk model that calculates a risk score, or a risk rating, such as high, medium, or low. This risk score or rating provides the AML Officer and the business line with a clear image of the risks the customer relationship and activities pose to the institution. Firms must comply with the Bank Secrecy Act and its implementing regulations («AML rules»). The purpose of the AML rules is to help detect and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.

Complement expert judgment with statistical analysis

Generally, AML rules are designed to identify and stop attempts to use brokerage accounts to launder criminal activity proceeds or to finance terrorism. They help financial institutions focus on money-laundering risks and develop critical intelligence for law enforcement. This analytical process allows organizations to determine the likelihood that a customer is involved with money laundering or terrorist financing. By gauging the risk level of each client, they can perform the appropriate due diligence and minimize involvement in a money-laundering scheme.

  • Refer to the Examination Procedures page to download Word document versions of the examination procedures to print or save.
  • Understanding its risk profile enables the bank to better apply appropriate risk management processes to the BSA/AML compliance program to mitigate and manage risk and comply with BSA regulatory requirements.
  • Presentation-ready reports, summaries, and scoring deliver a comprehensive money laundering risk profile to examiners, board members, and other stakeholders.
  • This information will determine the best way to monitor transactions, validate identities, and file suspicious activity reports.
  • Your risk scores (low risk, high risk, highest risk) will then be up-to-date and help keep you compliant with AML regulations.

You need to carefully assess customers who have a history of suspicious transactions, a cloudy background and no obvious way of earning their income. If you do not carefully monitor your customer risk, you may face crippling fines. It helps to have an unbiased person evaluate your firm’s anti-money laundering program to find weaknesses and provide opportunities for improvement.

Financial Markets, Financial Institutions, and Fiscal Service

Banks must establish and maintain procedures reasonably designed to assure and monitor compliance with BSA regulatory requirements (BSA/AML compliance program).[9]12 USC 1818(s) and 12 USC 1786(q). AML program requirements and there must be some indication of purposeful delegation. To achieve the purposes of the BSA, the BSA/AML compliance program should be commensurate with the bank’s ML/TF and other illicit financial activity risk profile.

If you are using automated systems, FINRA examiners will look to see if your thresholds are producing meaningful results, how those thresholds are derived, and what quality assurance efforts you have to ensure that your monitoring is appropriate. If you use a manual system, FINRA examiners will review to see if key staff are properly trained to identify suspicious activity. Whether you file a SAR-SF or not, remember to document whatever process you use to review and analyze transactions for suspicious activity reporting.

The Solution for Meeting Today’s Regulatory Challenges

To the extent permitted by law, this
implementation may include sharing or obtaining customer information across
business lines, separate legal entities within an enterprise, and
affiliated support units. Firms must comply with the Bank Secrecy Act and its implementing regulations (Anti-Money Laundering rules). The purpose of these rules is to help detect and report suspicious activity including money laundering, terrorist financing, securities fraud, and market manipulation.

AML Risk Assessment

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