Where Does BSA Apply?

A question that surprisingly comes up quite often is whether the Bank Secrecy Act applies to just the United States or if it applies on a more global scale.  To answer that question, we have to step back to 1989 and the establishment of the Financial Action Task Force (FATF).  FATF is a global policy-making body comprised of 39 countries and jurisdictions. They’re responsible for examining money laundering techniques and trends and setting international standards on combating money laundering.

Listen as Deb explains more.

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First MSB Enforcement Action

Earlier this year, the National Credit Union Administration (NCUA) issued its first enforcement action against a small, Michigan-based credit union (CU), for servicing cannabis clients without adhering to FinCEN’s guidance.  Specifically, the CU was relying on manual compliance processes to monitor its 150 Marijuana-Related Business (MRB) customers.

Banking and Marijuana-Related Business (MRB) customers

The Stipulation and Consent to Cease and Desist Order requires the CU to:

  • Implement an automated system to effectively monitor and identify all transactions for suspicious activity…;
  • Engage a third party to determine if prior MRB activity warranted a SAR and if so, file any SARs recommended by the third party;
  • Immediately develop and implement a system to ensure all Currency Transaction Reports are filed accurately…; and,
  • Stop opening new MRB accounts effective immediately.

This Order emphasizes that manual compliance processes are likely inadequate for monitoring MRB activity.  It also lays out what regulators expect automated compliance and/or suspicious activity monitoring systems to include to further support compliance with FinCEN’s MRB requirements. These include, at a minimum:

  • Reconciliation of MRB Point of Sale, METRC, or accounting system data relative to member deposits.
    METRC (Marijuana Enforcement Tracking Reporting Compliance) is a web-based, state-mandated software platform for end-to-end tracking of the cannabis supply chain, from seed to sale. This includes the production, manufacturing, testing, distributing, and selling of cannabis products.

  • Ongoing monitoring of adverse public information affecting MRBs;
  • Timely verification of changes in licensure status, including notification of a lapse in an MRB’s state licensure;
  • Systematic monitoring of unusual ACH or wire activity for MRB accounts; and
  • Monitoring of FinCEN “Red Flags” outlined in FIN-2014-G001, “BSA Expectations Regarding Marijuana-Related Businesses.”

Are you banking MRBs?  Do your monitoring systems fit the bill?  Learn more about FinCEN’s guidance and expectations for banking cannabis businesses by checking out our webinar, BSA/AML and Cannabis, which is available now OnDemand.


BSA Compliance: Third-Party 314(a) Searches

Do you rely on a third party or your core processing vendor to conduct your 314(a) searches?

If yes, are you logging into FinCEN’s Secure Information Sharing System (SISS) and downloading each 314(a) list so the third party/core processor can run it against your customer records?

Find all your BSA Resources HERE!

BSA Compliance: Third-Party 314(a) Searches

If you rely on a third-party/core processor to download the 314(a) lists on your behalf, you likely have a problem. While you can rely on them to run the searches against your customer records, each individual bank MUST still have a 314(a) contact person, and each bank/contact MUST log into FinCEN’s SISS themselves in order to download the 314(a) lists.

The issue is not necessarily that banks could receive different 314(a) lists.  FinCEN confirmed that the same list is generally provided to all banks.  The only time a list “may” differ is IF there’s a targeted, special list that pertains to a specific area. That said, we are not aware of any such targeted lists.

This issue is that you cannot allow a third party to download the lists that it receives from FinCEN, on your behalf. EACH bank MUST log in and download their own 314(a) lists. We don’t see a lot of issues with this but It might be a good idea to verify that you have a contact person in your bank, that they are receiving the communications from FinCEN and THEY are logging in to download the 314(a) lists.


CFPB Issues Interpretive Rule on Sex Discrimination

On March 9, 2021, the CFPB issued an interpretive rule regarding sex discrimination under the Equal Credit Opportunity Act (Regulation B).  Regulation B prohibits a creditor from discriminating against an applicant on the basis of race, color, religion, national origin, sex, marital status or age.   This ruling officially clarifies that “sex” discrimination includes sexual orientation discrimination, gender identity discrimination, …discrimination based on actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other associations.

This ruling is not unexpected.  In June 2020, the U.S. Supreme Court ruled, in Bostock v. Clayton County, Georgia, that the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 encompasses sexual orientation discrimination and gender identity discrimination.  President Biden also issued an Executive Order on Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation in January 2021 and HUD followed with a memorandum in February which clarified that HUD interprets the Fair Housing Act to bar discrimination on the basis of sexual orientation and gender identity and directing HUD offices and recipients of HUD funds to enforce the Act accordingly

The CFPB also stated they look forward to working with Congress on the Equality Act, which, if enacted, would codify protections for consumers against sexual orientation and gender identity discrimination in ALL financial products and services.

If you need in-depth training on Fair Lending, check out our webinar available now OnDemand.


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!