Pub. 10 2020 Issue 4

13 PUB. 10 2020 ISSUE 4 FinCEN and their functional regulator as soon as practicable. Second, FinCEN outlined the emerging trends connected with COVID-19: impostor scams, investment scams, product scams and insider trading. Financial institutions are reminded to review FinCEN’s 2017 advisory FIN- 2017-A007 for descriptions of other relevant typologies, which included benefits fraud, charities fraud and cyber-related fraud. Enter - ing “COVID19” in Field 2 of the SAR-tem - plate when reporting suspicious transactions linked to COVID-19 was highly encouraged. But key pressure points continued to emerge in the new environment for financial insti - tutions. Not only were financial institutions required to identify fraudulent and potentially suspicious activity outside of normal trends, but they also had to detect disaster-related fraud, increase their protection of elderly cus - tomers and report on COVID-19 trends and losses. This is not to say financial institutions have not risen to the challenges. FinCEN’s April 3, 2020, notice encouraged financial institutions to “consider, evaluate, and, where appropriate, responsibly imple - ment innovative approaches to meet their BSA/anti-money laundering compliance obligations.” Institutions have considered the health and safety of their employees and customers. They have maintained the finan - cial system’s stability, managing and mit - igating the risks of money laundering and fraud losses. But what considerations should financial institutions continue to focus on as they navigate BSA/AML compliance? 1. C ontingency Plans — Financial institutions need to be anticipating best and worse case scenarios. How will the financial institution reestablish its BSA/AML program and obligations after pivoting from remote work and returning to normal? If the pandemic continues, what longer-term necessities and measures need to be taken to main - tain or increase the financial institu - tion’s BSA/AML practices? 2. Customer Due Diligence — COVID-19 has transitioned rapidly into more than a disease. It has also impacted online banking. Custom - ers are expecting banks to go even more digital via their online channels. This has not been without changes in expected activity for both individuals and businesses. Has an institution increased its daily transaction limits to meet increased demands for additional cash? Has cash hoarding strained a bank’s CTR filings? Did the organiza - tion experience an increase in false posi - tives for fraud due to changing customer behaviors? Financial institutions need to continually evaluate their programs to grab control of the challenges and added workload to their BSA/AML staff. 3. Risk Assessments — No longer something for larger or more complex financial organizational structures, the need for risk assessments has increased. Customers have changed the scale of their operations. Under the CARES Act, programs like the Paycheck Protection Program have f looded lending and operations divi - sions within the bank, which inhibits adequate oversight. Risk assessments need to continue to be reassessed on both a customer base and organiza - tional level to reconsider customer relationships’ nature and purpose, continue that development of custom - er risk profiles, and reassess bank operational systems and controls. This was reemphasized in the update to the FFIEC BSA/AML Examination Manu - al released April 15th. 4. C oordination and Communication — Identifying logistical challenges is one aspect; effectively communicating them to bank staff is another. Internal communication is essential. Impactful and cohesive running of compliance teams will aid financial institutions in minimizing the challenges of adminis - tering an effective BSA/AML com - pliance program during a pandemic. A risk-based approach with diligent adherence to a bank’s BSA obligations will define compliance problem areas and assist financial institutions in miti - gating their risks. 5. Technology — FinCEN’s April guid - ance encouraged financial institutions to be innovative through the deployment of “novel technologies.” While this encour - agement has many possibilities, it does create challenges for financial institu - tions. Banks still must maintain prudent evaluations whenever implementing innovative approaches to current BSA/ AML processes. Financial institutions need to maintain robust oversight of their vendor management relationships with third-party providers, especially related to BSA/AML program implementation. Safety, soundness and consumer protec - tion are heavily impacted by technology, increasing a bank (and regulator’s) focus on monitoring. The COVID-19 pandemic has introduced or increased emphasis on a risk-based Financial institutions need to consider, evaluate and determine what a risk- based approach means for their institution. continued on page 14