Assessing Your BSA/AML Compliance Program

by Michael Volkov

aml8Like every compliance project, when you start the process, it is important to conduct a careful assessment of risks and your company’s compliance program.  With the growing risk of criminal, civil and regulatory enforcement of BSA, sanctions and AML laws, banks and other financial institutions need to dedicate some time and effort to this process.

From my experience, banks and financial institutions turn to – and rely on – technology as the primary component of every BSA/AML compliance program.  Given the magnitude of the task, the reliance on technology appears to be an absolute.

Building a compliance program centered on technology, however, can create its own set of serious risks.  A technology-centered program reflects careful marketing initiatives by the vendors of these competing programs.  It is important to build a complete program, which recognizes the non-technology needs, factor in specific technology requirements, and brush the edges of the program with important controls and metrics.

The key focus continues to be established by the US Sentencing Guidelines: Is the company’s BSA/AML compliance program “effective”?  Here are some basic steps for evaluating your bank or financial institution’s BSA/AML compliance program:

Structure: It is now beyond question – every bank and financial institution needs to empower an independent chief compliance officer.  HSBC has separated its compliance function completely from the legal function.  JP Morgan has announced that its Chief Compliance Officer will report directly to the Chief Operating Officer and is elevated to the senior executive staff.  This is new norm and banks and other financial institutions have to start with this structural change.duediligence4

Review of Written BSA/AML compliance program:  The written compliance program, which should be on the company’s website, should include the following elements: a system of internal controls; a compliance officer(s); training; testing and monitoring; periodic review of performance and modifications as warranted.

Senior Management involvement and monitoring: The board of directors and senior management must receive sufficient reports which are timely and informative about the performance of the compliance program.

Risk Assessment: The BSA/AML compliance program should reflect the current risk assessment identified in an initial review of risk associated with the banks products, services, operations, customers, geographic locations and business entities.

aml7Internal Controls: The internal controls have to include policies and procedures to accomplish the following tasks: identification of high-risk products, services, customers and geographic locations; monitoring and updating the risk profiles for each of these categories; providing periodic updates to the board (or a compliance committee) and senior management which focus on potential risk area, including weaknesses in the BSA/AML compliance program, corrective actions, the status of SARs filed or being reviewed, pending due diligence inquiries for high-risk customers and business accounts.

Customer Due Diligence:  Banks and other financial institutions need to adopt more rigorous customer due diligence procedures.  All too often the business desire to establish a new account outweighs the due diligence process and customers are allowed to open an account pending completion of the due diligence process.  By doing so, compliance is sacrificed at the expense of business needs.  The incentive for the business side to cooperate in any due diligence review is diminished once the account is opened.  If the bank is serious about compliance, it should delay the opening of the account, pending completion of the due diligence review.

Reportable Transactions:  The BSA/AML compliance program needs to establish standard procedures and thresholds for identifying reportable transactions (SARs, CTRs and CTR exclusions), creating a set SAR review and reporting procedure with strict deadlines for the completion of the process.

Training:  A regular training program, both on-line and in-person needs to be established with appropriate record-keeping.  The training program should include the board of directors, senior management and all employees involved in relevant activities.

Transaction testing:  There are a number of areas to conduct transaction testing, including: high-risk areas, customers and transactions.  The transactions should be different from those examined by an independent auditor.ethics8

Independent testing:  Aside from monitoring and reporting functions, any good BSA/AML compliance program includes periodic audits conducted by an independent auditing company.  The audit should be reported to the CCO, senior management and the board committee.  The results should be carefully reviewed and recommendations for improvements should be implemented.  Accounts or customers identified in the review of information obtained from downloads from the BSA-reporting database.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov

The Volkov Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.