Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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12/15/2008 IRS and FinCEN Release MSB Exam Manual: A Compliance Officer Must-Read

FinCEN and the IRS have released a 159-page manual detailing how IRS examiners should conduct anti-money laundering program examinations of money services businesses. The manual is also effectively a blueprint for how internal or external auditors should review the programs. Examiners are told, for instance, to construct a history of an institution’s filings of SAR-MSBs, CTRs, and other forms, and determine if there are any trends or changes that should be explained. This means that compliance officers would be well advised to have spreadsheets with the same information and should be prepared to explain to both auditors and examiners the reasons for the changes in filing patterns. Examiners may also want to know if the assumptions of “intelligent” software systems for detecting unusual or suspicious activity are appropriately modified as patterns of filings change. Examiners are told to see if related entities, such as nearby branches in a branch-based funds transmitter, are demonstrating AML failings. This means that someone in a multi-branch institution’s head office should be checking patterns across the branches, and advising branches of issues that seem to be arising in geographic regions. The new examination manual will be the subject of an extensive analysis in a forthcoming Monitor, and new versions of the MSB compliance checklist and red flag checklist have been posted on the Compliance Tools page of the website devoted to this treatise, http://www.civicresearchinstitute.com/moneylaundering/checklists.html.

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