Where Policies Fail

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Where Policies Fail

Last week, Citibank was cited for failures of its BSA Compliance Program under a cease and desist order issues by the Office of the Comptroller of the Currency (OCC).

The Office of the Comptroller of the Currency said that Citibank’s U.S. banking unit showed deficiencies in its compliance with the bank-secrecy act, which requires banks to report on suspicious activities and maintain other protections against money laundering.

The OCC said it found, without an admission or denial from Citibank, that the bank had inadequate internal controls and ineffective independent testing. The OCC also said that the bank did not develop adequate due diligence of foreign correspondent banking customers involved in remote deposit transactions, in turn resulting in the failure to file timely suspicious activity reports.

A remote deposit transaction involves submitting a scanned image of a check or draft for deposit and transmitting it to a financial institution. Citibank found through internal audits, that it hadn’t properly monitored those transactions from 2006 to 2010 and it reported its findings to the OCC.

The regulator said the bank had numerous weaknesses, including problems identifying and monitoring high-risk customers.

Citibank neither admitted nor denied the regulator’s allegations and entered into a consent order with the regulator to fix the problems. Though the regulator did not yet issue a civil money penalty (fine), it still has the right to do so.

This certainly does serve as an exclamation of the need to perform a truly independent review of both one’s Anti-Money Laundering Compliance Program as well as one’s Sanctions Compliance Program. Having a qualified independent set of eyes in review of such programs serves as an invaluable resource to identifying and correcting any potential deficiencies and making sure that you have implemented sound business policies, procedures and control mechanisms to make sure your program is operating an optimum level of performance.

And, just hiring a large, well known consulting firm does not necessarily insure that your program review is sufficient. We have found issues in some clients programs that larger firms have missed on previous program reviews.  The persons doing the audit must have a readily demonstrable body of experience and work to support that they are the right folks for the job.

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