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BSA/AML and OFAC Compliance Higher Stakes and Greater Consequences for Banks

March 25, 2013

By THE GLOBAL BANKING AND PAYMENT SYSTEMS PRACTICE

Since the start of the 2008 financial crisis, the Federal Banking Agencies (“FBAs”) have keenly focused on balance sheet issues, on both an institutional and systemic basis. As a consequence, supervisory attention directed at compliance areas such as enforcement of the Bank Secrecy Act (“BSA”), anti-money laundering (“AML”) laws and anti-terrorist financing laws issued by the Office of Foreign Assets Control (“OFAC”) has not been as prominent. About a year ago, this trend came to an abrupt halt and, since then, we have seen a number of high profile supervisory and enforcement actions involving BSA/AML compliance issues, and several notable OFAC-related compliance actions. These enforcement actions have been accompanied by a series of steadily increasing stern warnings by regulators, both publicly and during examinations, indicating that BSA/AML and OFAC compliance issues are now central issues that the FBAs are extensively reviewing at all insured depository institutions (“IDIs”) and, most notably, at various card-based programs and money service businesses (“MSBs”) supported by IDIs. Financial institutions, from multinational bank holding companies to regional and community banks to non-bank financial services companies, should be prepared for stepped up scrutiny of their existing BSA/AML and OFAC compliance programs.