APY Range Calculator

As more financial institutions begin to offer “reward”-type accounts, it’s important to ensure the annual percentage yield (APY) is being accurately disclosed. 

The APY calculation requirements can be found in Appendix A of Regulation DD (Truth in Savings).  Part I addresses the APY for account disclosures and advertising purposes and in this case, we want to look at Part I, Letter D, “Tiered-Rate Accounts (Different Rates Apply to Specified Balance Levels)”.  It provides two options for calculating the APY for a tiered-rate account:

            Option A:

Under this method, an institution pays on the full balance in the account the stated interest rate that corresponds to the applicable deposit tier.

            Option B:

Under this method, an institution pays the stated interest rate only on that portion of the balance within the specified tier.

Under Option A you will only disclose a single APY for each tier (for example, .75% APY).  Under Option B; however, you must disclose an APY range that shows the lowest and highest APY for each tier (other than the first tier).  For example, .75%-.63% APY.

We’ve come up with a calculator to help!  We’d still recommend that if your software can do the calculations, you let it.  If nothing else, this is a good tool to double check the information it kicks out.  All you need to do is enter the compounding frequency, as well as the balance requirements and interest rate for each tier and the tool will do the rest!  Please note: this APY Range Calculator only works if you are compounding interest.

Be sure to check out the calculator in the FREE Deposit Resources on our website and listen to Deb Irving explain how to use it . 

You can also read more about this requirement in the March edition of Banking on BCC.

Find all your Deposit Operations Free Resources here!

Published
2021/02/26

Proposal on Convertible Virtual Currency and/or Digital Assets

FinCEN recently announced a Notice of Proposed Rulemaking (NPR) regarding “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets”.  While the comment period ended on January 4th, this proposal gives us some insight into what FinCEN is thinking with regard to the compliance complexities and challenges presented by virtual currency and digital assets.  This is an emerging and continually evolving area that financial institutions need to spend some time and effort.

Listen to Deb explain more about what this NPR entails.

This is just a proposal. Stay tuned!

Find more BSA Resources here – https://www.bankerscompliance.com/regulations-we-cover/the-bank-secrecy-act-bsa/

Published
2021/01/08

“Mitigate and Manage” vs. “Limit and Control” Risk

One of the changes in the recent FFIEC BSA Examination Manual updates was a move from having internal controls that “limit and control risk” to achieve compliance with BSA, to having internal controls that “mitigate and manage” risk associated with money laundering, terrorist financing (ML/TF) and other illicit financial activity.

This change stems from the July 22, 2019, Joint Statement on Risk-Focused Bank Secrecy Act/Anti-Money Laundering Supervision.  The Statement said, “to assure BSA/AML compliance programs are reasonably designed to meet the requirements of the BSA, banks structure their compliance programs to be risk-based and to identify and report potential money laundering, terrorist financing and other illicit financial activity…Banks determine the levels and types of risks that they will assume and are encouraged to manage customer relationships and mitigate risks based on customer relationships, rather than declining to provide banking services to entire categories of customers.”

Limiting risk may have led many financial institutions to de-risk, in other words, they decline to provide banking services to entire categories of customers.  For example, de-risking drove a lot of financial institutions to get out of high-risk activities, such as banking MSBs, marijuana-related businesses, etc.  The updates to the BSA Examination Manual make it clear that examiners don’t want you to run away from risk, they want you to put appropriate controls in place and…manage it!

If you want more on the updates to the BSA Examination Manual, be sure to check out our webinar, The New BSA/AML Examination Manual, which is available now OnDemand.

Published
2020/06/03

See BSA/AML Free Tools Here – https://store.bankerscompliance.com/link/BSAFreeTools

ACAMS: Financial Crimes Under the Microscope

We recently sat in on an Association of Certified Anti-Money Laundering Specialists (ACAMS) webinar that addressed many of the rising issues related to the COVID-19 pandemic.  They expect banks to see more online banking/mobile banking usage, as well as uncharacteristic transactions for certain customers.

These changes in customer behavior will ultimately result in increased transaction alerts within your BSA monitoring systems.  This might include spikes in online banking, mobile banking, person to person (P2P) transfers, wires, etc.  You’ll likely want to take a risk-based approach to handling such increases and that approach could also depend on your Business Contingency Plan (BCP).  For instance, where does your BCP allocate your compliance resources?  Perhaps your BCP calls for more resources, but in the event of the COVID-19 pandemic, you have actually had to reduce resources/personnel. Any necessary adjustments to your BCP should be documented and if you don’t have a BCP, develop one!

Some areas where you may or should see a change include:

  • Bars and restaurants are generally closed to the public.  Even though they may be operating on a take-out only basis, their overall activity should be decreasing.  Even as they start to reopen, activity should still generally be less.  If they continue to have “normal”, pre-COVID-19 activity, you need to determine why.
  • Measures to prevent the spread of the virus have disrupted not only legitimate businesses, but illicit ones also.  Those using bars, restaurants, salons, clubs and other business “fronts” for laundering ill-gotten funds must now find different covers.  For example, human traffickers can’t openly operate front businesses like massage parlors; money couriers/mules will now stand out because of the decrease in air and interstate travel, etc.  Businesses will be created, or compromised, in order to support activities and hide income derived from COVID-19 fraud schemes.  
  • Customers who have never used certain products or services (e.g., mobile banking, wire, P2P, etc.) will likely start doing so.  You will need to determine if it’s normal given the times or unusual.
  • Withdrawals of cash will likely increase due to fear or uncertainty in the economy.  People may feel safer keeping cash at home or on-hand.  It may be best to come up with a standard way of handling these requests IF other suspicious activity, such as structuring, is not involved.  That way, activity analysts can address the increased alerts efficiently.

You might consider developing an NAICS list or AML monitoring scenario of restricted businesses.  Continued activity could indicate illicit income from businesses that should be shut down during the pandemic.

This increase in alerts means more information to wade through.  This is also challenging because you may not be working with a full staff at this time.  Modifying your alert scenarios and thresholds temporarily might help reduce the volume but you should have controls and documentation in place prior to doing so, if it’s not addressed in your BCP.  Make sure you have a change control process in place.

Alert thresholds should not be changed on a whim and you’ll likely want some approval process (BSA Officer) in place to do so.  For example, IT should not be changing any sanctions alerts due to increased activity going through the financial system to support certain countries.  Pay close attention to changes in sanctions and sign up for sanction alerts and issuances.

Be careful too about turning certain alerts off entirely as things will likely get missed.  A better approach might be to do a delayed review, for example, every 90 days instead of every 30 days or an abbreviated review vs. a full review. 

Ultimately, you need to focus on your program as a whole.  Make sure it’s working, be realistic about what you can and can’t do, etc.  Communicate with your regulators, especially if you’re unsure of your ability to meet reporting timeframes, etc.  Your focus should be on your adaptability, resiliency and sustainability, not “pleasing” your examiners.

Published
2020/05/13

See BSA/AML Free Tools Here – https://store.bankerscompliance.com/link/BSAFreeTools

Elder Fraud Increasing

Elder fraud, elder abuse, elder financial exploitation – whatever you call it, it’s not only a horrible crime but it’s on the rise.  FinCEN recently released a report, “Financial Trend Analysis: Elders Face Increased Financial Threat from Domestic and Foreign Actors”, which, as the name suggests, indicates that elders face financial threats both at home and from abroad. 

This isn’t necessarily new information.  The CFPB also released a report in February 2019 outlining issues and trends related to Elder Financial Exploitation (EFE) Suspicious Activity Reports (SARs).  This should be a little bit of a warning shot to your BSA Compliance Team.  Specifically, that this is a growing area of risk, you need to train your employees and do your part to protect your customers.  FinCEN Director Blanco stated:

“These SARs are also important to filer banks and MSBs because they show trends and patterns in criminal activity.  Every financial institution wants to protect its customers, and SAR reporting helps them do that.  Awareness of these reporting trends and potential exploitation methods can also help consumers protect themselves.”

A few of the major scam areas include:

  • Romance: scammers establish a “relationship” with a victim and then request money for a variety of reasons.
  • Emergency: scammers claim to be a loved one of the victim who has an emergency situation and needs money right away.
  • Lottery: scammers tell victims they won a lottery or other prize and they need to first send a tax or fee before they can claim their winnings.

While scams are a large portion of the EFE SARs filed, theft by a family member or an unrelated caretaker are still the most financially devastating.  Amounts reported for theft are almost double the amounts reported for scams.

For more on the February 2019 FinCEN report, be sure to check out the Management Minute in the April 2019 edition of Banking on BCC.

Want a to get a free edition of our magazine? Email us at consultants@bankerscompliance.com.

Published
2020/01/29