Because failing to comply with the legal obligations imposed by the Bank Secrecy Act (BSA) can subject national banks or other financial institutions to significant penalties and considerable hardship, it is paramount for executives at these companies to understand how the law is enforced by the Office of the Comptroller of the Currency (OCC). Even a basic idea of how this federal agency uses the BSA to stop money laundering by regulating financial institutions can give the executives of those institutions the tools that they need to protect their companies from legal liability.
Dr. Nick Oberheiden is an anti-money laundering lawyer at the national corporate compliance law firm Oberheiden P.C. Here, he summarizes what he thinks are the most important things for financial executives to know about how the Office of the Comptroller of the Currency (OCC) enforces key provisions of the BSA.
Multiple Federal Agencies Enforce the BSA
When it comes to financial crimes, it is extremely common to see multiple federal law enforcement agencies teaming up to investigate and prosecute potential misconduct. This is also the case for money laundering and the BSA, which is generally enforced by the following agencies:
At the FBI, these investigations are handled by the Money Laundering, Forfeiture, and Bank Fraud Unit (MLFBU). At the DOJ, these cases are generally pursued by the Money Laundering and Asset Recovery Section (MLARS), which is itself composed of seven different units:
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Bank Integrity Unit
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International Unit
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Money Laundering and Forfeiture Unit
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Policy Unit
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Program Management and Training Unit
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Program Operations Unit
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Special Financial Investigations Unit
However, these law enforcement agencies generally only come into play when there is a money laundering case to pursue. From the perspective of a bank or a financial institution, you are far more likely to have to deal with the regulators who work to ensure that your company is complying with its legal obligations under the BSA. While this also falls under the realm of FinCEN, the OCC also plays a significant role in the enforcement mechanism.
Both the OCC and FinCEN are bureaus of the U.S. Department of the Treasury. But while FinCEN focuses on detecting and investigating financial crimes, the OCC keeps its eyes more focused on the financial institutions whose systems can be abused by money launderers.
In enforcing the Bank Secrecy Act, the OCC suggests regulations to promulgate, supervises financial institutions in their compliance efforts, and conducts OCC enforcement actions against institutions that fail to uphold their legal obligations under the BSA.
Basically, OCC’s role is to ensure that financial institutions, such as national banks, federal savings associations, and federal branches or agencies of foreign banking organizations, comply with the BSA so that laundering money through them is more difficult. FinCEN’s role is to detect money laundering and then act on it.
The OCC and BSA Examinations
One of the main ways that the OCC enforces the Bank Secrecy Act is to conduct regular examinations of covered financial institutions to see how well they are complying with the law’s obligations.
Because the goal is compliance, the OCC is very up-front about what it wants from banks, credit unions, and other financial institutions. It provides numerous guidelines, bulletins, and walkthroughs that are designed to help institutions reach a state of compliance so they will pass their examination. It even posts detailed descriptions of the examination procedure, as well as a manual that lays out what is required and expected of financial institutions across the country.
Similar to an audit by the federal government, a BSA examination scrutinizes a financial institution’s anti-money laundering policies to see if they line up with the requirements under the Bank Secrecy Act. Financial institutions that fail the audit can be penalized or face sanction-backed demands that they come into compliance before a certain date.
While most institutions will be subjected to a “core examination” by OCC examiners, some will face a more arduous “expanded examination.” These are generally reserved for banks and other financial institutions that are not based in the U.S. or that handle certain financial transactions that are more complex or prone to money laundering.
Taking Compliance Obligations Seriously Can Avoid Enforcement Actions
If your financial institution has taken its Bank Secrecy Act compliance protocols seriously at the drafting and implementation stages then it should not face a BSA FinCEN or OCC enforcement action for a failed examination. However, there are times when this is not the case.
It is important to remember that the BSA requires financial institutions to conduct risk assessments to ascertain which business practices are most likely to lead to customers laundering their money, and then take appropriate precautions to keep that from happening. But what precautions are “appropriate”? And when is a business practice sufficiently “risky” that it requires additional attention?
Reasonable minds could disagree on these issues. When you make a decision and the OCC disagrees with you, your financial institution can face repercussions even though you did everything that you could to avoid them.
Dr. Nick Oberheiden is an OCC enforcement defense lawyer and founding partner of Oberheiden P.C. He has helped numerous financial institutions navigate the complex field of BSA compliance. He has also defended other institutional clients who have faced allegations of non-compliance and who were facing BSA enforcement actions from the OCC. One of the things that he frequently tells his clients is, “There is no substitute for effective and experienced legal counsel at every stage in the BSA enforcement process – from creating the compliance protocol at the financial institution to implementing it to ensuring that it works through internal auditing to handling allegations that your company is not upholding its legal obligations. These are highly technical compliance protocols. Worse, they are based on laws and regulations that could easily be interpreted differently by different people or parties. A lawyer who is experienced in BSA compliance and enforcement actions and who has helped prior clients through the same situation that you are in is a huge asset to have.”
