Compliance and the Bank Secrecy Act

Category: The Bottom Line
Author: NXTsoft

In the OCC Semiannual Risk Perspective (Fall 2020), the OCC identified 23% of the open matters with financial institutions involving Compliance Risk. Those noted risks are as follows:

Bank Secrecy Act

Scams and money-laundering techniques in the new environment created by the COVID-19 pandemic are widespread. Financial institutions should be vigilant in “identifying potentially illicit activity, including monitoring for schemes designed to take advantage of people affected by the COVID-19 pandemic and other means that criminals can use to exploit the situation.” Examples include scams targeting those in need by advertising and trafficking counterfeit medicines, phishing schemes with the aim of stealing personal and financial information, setting up fake charities to accept donations that appear to be intended to help others suffering from the pandemic, and work-from-home schemes aimed at people who are out of work or those looking to earn a living while quarantined at home.

The Financial Crimes Enforcement Network website includes a coronavirus update section that provides common red flags and COVID-19-related schemes. FINANCIAL INSTITUTIONS SHOULD BE AWARE OF EVOLVING TYPOLOGIES AND ENSURE THAT THEIR ANTI-MONEY-LAUNDERING PROGRAMS ARE COMMENSURATE WITH THEIR RISK PROFILE.


Consumer Compliance

Financial institutions should follow effective change management and compliance risk management processes to identify, measure, monitor, and control the emerging risks related to consumer products or services associated with the COVID-19 pandemic. Pandemic-related changes in staffing and availability may affect banks’ ability to comply with areas to include CARES Act provisions. Financial institution’s strategies for processing consumer requests and applications may vary with implementation, increasing the risk of disparate treatment and disparate impact on a prohibited basis.

Financial institutions closures, reduced operations, and communication issues (e.g., limited hours, lobby or location closures, and strained call center capacity) may result in increased customer complaints that could indicate operational or compliance-related issues. Increased reliance on remote work environments may create challenges to maintaining safeguards for protecting consumers’ personal information and for monitoring customer interactions for consistency with bank policies and procedures.

Interagency and Consumer Financial Protection Bureau statements provide information on working with borrowers affected by the pandemic. These statements clarify the agencies’ supervisory and enforcement priorities and approaches for fair lending and other consumer protection laws during the pandemic.

It is of substantial value to be aware of these other areas of Compliance and BSA Risk as identified by the OCC as this provides insight as to the key financial institution risks as defined by the regulatory agencies.

February 5, 2021
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