4.26.9  Examination Techniques For Bank Secrecy Act Industries (Cont. 2)

4.26.9.7 
Money Transmitter Overview

4.26.9.7.4  (06-01-2006)
Review of the Records

  1. Any records the financial institution maintains for the business that are relevant to the BSA examination can be requested and reviewed. The examiner will determine if the financial institution is maintaining adequate records and must document any recordkeeping violations.

  2. Ask to see the money transmission company’s policy and procedures manual regarding the BSA registration, recordkeeping, reporting, and AML compliance program requirements. The examiner should review the information for completeness and determine if AML compliance program procedures are adequate. Determine how risk of money laundering was assessed and how this risk assessment figured into the establishment of the compliance program.

  3. Inspect a sample of copies of CTRs and SAR-MSBs filed by the money services business to ensure they are accurate and complete. Ensure filed CTRs and SAR-MSBs have been retained by the financial institution for the required five-year period. Use the CBRS database to verify that the CTRs and SAR-MSBs were timely filed and contain the same information as the copies maintained by the financial institution.

  4. Review internal audits and external agency audits and reviews specific to BSA policies, procedures, or operations for BSA issues.

  5. Review monthly commission statements to detect large daily transactions or transactions conducted over a period of several days (multiple transactions) which appear to be related. (Each money transmitter receives commission statements from their respective money transmission business center or home office).

  6. Review the daily cash reports and reconcile these to the bank deposit slips. Generally, a money transmitter will deposit all monies received each day. The daily cash reports can be traced to the daily summary sheets and the deposit slips to the monthly bank statements.

  7. Review the daily summary sheets for all send and receive transactions. If the daily summary sheet has 20 transactions recorded, there should be 20 transaction documents to support them. The amounts listed on the daily summary sheet can be reconciled to the original send or receive documents. Review the original send and receive transaction forms for completeness. Determine if all the required information has been obtained and recorded on the forms. The examiner may use a dollar amount criteria for selecting forms for inspection.

  8. Review the original send and receive transaction forms for completeness. Determine if all the required information has been obtained and recorded on the forms. The examiner may elect to select a dollar criteria for inspection of these forms.

  9. Look at the transaction and fee amounts recorded on the transaction forms. The total amount collected line should include both the transaction amount and fees collected. These totals can be traced to the daily summary sheets.

  10. Scan each group of records for possible structured transactions occurring on the same day or over a period of several days. For example, a 5:00 PM transaction with the transactor sending $6,000, and again at the same location on the same day a 5:10 PM transaction with the transactor sending $5,000, could be structured transactions. Examiners should be aware of these or similar situations and must be prepared to discuss suspicious transactions with the money transmitter.

  11. When reviewing money transmitter transactions, note the telephone numbers given. A sender may give a false name and address, but may use a correct telephone number. The reason is that if the money cannot be delivered, the sender will want to be notified. Also watch for repetitive addresses, and senders and/or receivers names.

  12. Review the financial institution's records to determine if all the required information on money transmittals of $3,000 or more has been obtained and retained pursuant to the recordkeeping requirements of 31 CFR 103.33.

  13. The examiner may elect to use a database to input information from the transaction records for purposes of detecting structuring and other money laundering schemes.

  14. Analyze database sorts of the name, address, and phone number fields to detect possible structured transactions, unreported transactions, errors, and/or deficiencies in the financial institution’s BSA compliance system.

  15. If structured transactions or other BSA violations are detected, the examiner should interview the responsible person or employee who conducted the transaction. Based on the answers given, the examiner should consider expanding the scope of the examination. (Refer to IRM 4.26.6.) All facts should be discussed with the BSA Group Manager. The BSA Group Manager will decide whether or not to refer the violation to the Financial Crimes Enforcement Network for possible enforcement action.

  16. Obtain copies of all source documents that document any apparent BSA violations.

  17. Issue a Letter 1112 or make a referral on Form 5104 for all failures to file CTRs and any recordkeeping violations. Prepare in accordance with the examination guidelines. (Refer to IRM 4.26.8.)

  18. Follow procedures in IRM 4.26.6 to timely conclude the BSA examination.

  19. Prepare Form(s) 5346, Examination Information Report, when information is obtained during the BSA examination that indicates a possible income tax violation warranting referral. Keep in mind, however, that the primary purpose of the BSA exam is not to detect Title 26 violations. (Refer to IRM 4.26.6.)

  20. If warranted, extend the examination to more than one business location in the area. If several money transmitters are in the same geographical area, concentrate in that area.

  21. The databases of BSA examinations in the same geographical area should be consolidated and sorted to detect possible related structuring activity occurring at more than one location.

  22. Review copies of filed MSB registration and renewal forms (if applicable) for accuracy and completeness.

  23. Determine if the business is required to register as an MSB.

  24. Review agent list (if applicable) for all required elements.

  25. Forward agent list to BSA Workload Selection coordinator in a separate shipment from the case file.

  26. Review agent contracts and terms for acceptance and termination as an agent.

  27. Review all agents rejected or terminated as an agent and forward list to BSA Workload Selection coordinator in a separate shipment from the case file.

  28. During a BSA compliance examination of a national money transmitter's headquarters, obtain and review information on the agent network, sales/transmission and commission records, compliance program records, and internal processes for money transmission and reconciliation. Exams at the corporate level should focus on: compliance monitoring of operations, compliance training of issuer personnel and of agents, and internal reporting of compliance issues or of unusual transaction activity.

4.26.9.7.5  (06-01-2006)
Evidence

  1. The examiner must obtain documentation for each type of the following violations:

    1. Reporting – The date of the transaction, the amount, the individuals involved, and a detailed statement regarding the violation, including copies of source documents such as cash in/out slips, control registers, and teller cash proofs which support the violation.

    2. Recordkeeping – The details of the specific records which were not maintained or were inadequate, including management’s response to the violations.

  2. The knowledge of the money services business must be determined before determining whether violations should be formally referred to FinCEN.

    1. The key officers and employees should be interviewed again to document the money services business’ to any apparent violations.

    2. The existence of an internal compliance program may indicate knowledge. For example, if knowledge of the reporting and recordkeeping requirements is limited to upper management and the other employees are not similarly educated, the money services business may be at least negligent (for not properly instructing the employees.) The employees need to know what their BSA obligations are. The employees are the initial contact point where the information is obtained. Failure by upper management to ensure that factual information is correctly gathered may establish evidence of the money services business’ intent not to comply.

  3. Other factors indicating the money services business’ knowledge of the BSA registration, reporting, recordkeeping, and compliance program requirements, and its compliance intentions are:

    1. Prior BSA violations and BSA compliance related contacts with the IRS

    2. Training programs offered by the business

    3. The MSBs formal BSA compliance procedures

    4. Active involvement of management in oversight and internal control activities.

  4. In situations where knowledge cannot be determined within the scope of selected records, the examiner should expand the period to include recent transactions that occurred after knowledge can be clearly documented. For example, the examiner selected records from January, February, and March. The inspection of these records discloses currency transactions that appear to be structured and which should have been reported. The money services business denied knowledge of the structuring regulations during the initial interview. In April, the examiner informed the money services business about the suspicious transactions and of the structuring regulations. The examiner later expanded the examination period to include May and June transactions. The examiner found violations in May and June. The money services business’ knowledge was documented during the notification of the structuring violations and took no action to prevent the recurrence of violations. The money services business’ intent to not comply should be documented.

  5. Because willfulness is a state of mind, generally only circumstantial evidence of willfulness will be available. A willful violation is the intentional violation of a known legal duty.

  6. Since BSA penalties are assessed by FinCEN, which does not have any field examiners, the examiner must thoroughly document all facts on the issue of intent. After the examiner secures the necessary information and documents the apparent violations, the examiner should follow the procedures detailed in IRM 4.26.8.

4.26.9.7.6  (06-01-2006)
Money Transmitter’s Position

  1. After documenting the potential violations, the examiner should provide a list of the violations to the money services business and solicit a written explanation for each of the violations identified. The list should include:

    1. Date of the transaction;

    2. Customer name;

    3. Account number (if any);

    4. Amount of the currency transaction(s); and,

    5. Description of the transaction(s).

  2. The examiner should advise the money services business of any recordkeeping deficiencies as well as any deficiencies in their policies, procedures, internal controls, and compliance programs that might result in noncompliance with the BSA.

  3. Any additional documents or information, provided by the money services business in response should be reviewed and a determination should be made as to whether any items should be removed from the list of violations.

  4. When the money services business contends that a CTR was filed, and provides its retained copy as evidence, the examiner should query the CBRS database and conduct an exhaustive search before concluding that a CTR was not received. In conducting the search, the examiner should query all customer numerical identification on the CTR such as account number (if applicable), SSN, and identification credential number.

4.26.9.7.7  (06-01-2006)
Money Laundering Trends

  1. The financial institution and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the financial institution and the transactor(s) during the BSA examination.

  2. Money laundering techniques, which could be used by the financial institution, include:

    1. Failing to maintain complete records

    2. Failing to record specific transactions

    3. Failing to obtain the required information to comply with the recordkeeping requirements

    4. Failing to file CTRs or SAR-MSBs on reportable transactions

    5. Filing incomplete CTRs or SAR-MSBs

    6. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions

    2. Using several individuals at one or more locations to conduct a transaction

    3. Using aliases when conducting transactions

    4. Conducting numerous transactions at the same location at different times during one day.

  4. When evidence of a money laundering scheme is uncovered, a referral should be made on Form 5104. (See IRM 4.26.8 for referral procedures.)

4.26.9.7.7.1  (06-01-2006)
Examination Techniques

  1. The following techniques can be useful in uncovering money laundering schemes:

    1. Review electronic records if available. If not, review transmittal forms to ensure the financial institution is obtaining all the required information and verification, and for indications of fictitious information.

    2. Review transmittal forms looking for handwriting similarities. If similarities are noted, compare signatures on the forms. (Are different names being used?)

    3. Review send and receive forms, looking for transactions at nearby locations. It could be an indication of money laundering (i.e. paying wire transfer fees to convert cash into a check.)

    4. Review electronic records if available. If not, review transmittal forms looking for similar names and addresses for both senders and recipients,

    5. Review electronic records if available, if not, transmittal forms for similar phone numbers. (Are different customers using the same phone number?)

    6. Conduct BSA examinations of financial institutions within the same geographical area,

    7. Create a database to consolidate transactions of the financial institutions, which can be sorted to identify any related transactions, possible structuring.

    8. Review all financial services offered to see if customers are structuring transactions by using multiple financial services.

4.26.9.8  (06-01-2006)
Traveler’s Checks Overview

  1. Traveler’s checks are issued by national companies such as American Express, Thomas Cook, or VISA. There are also privately issued traveler’s checks.

  2. Traveler’s checks are negotiable monetary instruments. Individuals usually purchase them when they are traveling on vacations or business trips, instead of carrying cash.

  3. Sales agents of traveler’s checks may sometimes provide other services such as check cashing, wire services, or may operate a business such as a credit union or travel agency.

  4. Rather than run the risk of robbery, some businesses in high-risk areas will buy traveler’s checks throughout the day instead of transporting cash to the bank.

  5. An issuer, seller, or redeemer of traveler’s checks is one of the five distinctive types of financial services providers known as "money services businesses" or MSBs. (Refer to IRM 4.26.5 for a discussion on MSBs.)

4.26.9.8.1  (06-01-2006)
Nationwide Traveler’s Checks

  1. Financial institutions typically sell traveler’s checks as agents for national companies. The agent’s relationship to the issuer of the traveler’s checks is governed by a trust agreement.

  2. The agent is allowed to advertise that it sells the national company's traveler’s checks.

  3. Traveler’s checks are drawn on the national company’s bank account and the transaction is not complete until the national company receives the face amount from the agent and the traveler’s check clears the bank.

    Note:

    The issuer could consider the transaction complete for accounting purposes when the check is sold, or when the check is transferred to the agent, and/or when it receives the funds for the check sale from the agent. The key is that the issuer always sets aside an amount equal to the amount of the face value of the check sold to cover redemption of the check, upon transfer of the check to the agent, prior to the check’s redemption (though the check may not be cashed until some time later after the sale.

  4. The dollar value of traveler’s checks sold by an agent can be limited by the issuing company’s trust agreement or by the agent’s policy, but in theory they can be in any denomination. Most domestic issuers tend to limit the denominations of traveler’s checks sold in U.S. currency to $100, or at most $1,000. It should be noted that traveler’s checks may be issued in any of several currencies by issuers. Some of the most common currencies for traveler’s check issuers include the U.S. dollar, the Canadian dollar, the Euro, the Japanese yen, and the Saudi rial. When examining agents that issue traveler’s checks in foreign currency, one should be aware of current exchange rates in order to evaluate compliance against BSA reporting and recordkeeping requirements.

  5. The national company issues and maintains records of traveler’s check issuance or sales to agents, as well as records of cashed traveler’s checks. The agent maintains sales records of traveler’s checks using a sequential numbering system.

  6. An agent’s summary sales report is sent to the national company daily and the correspondent bank sends a clearing report. Using these reports, the national company keeps a record of all traveler’s checks sold and cashed. The issuer maintains, and agents are sent, a discrepancy statement for traveler’s checks cashed but not reported as sold. If the agent is a nationwide entity with many outlets, the agent may consolidate its reporting records so that the national issuer may receive the same information regarding traveler’s check transactions, but in a manner that does not report sales at the individual outlet location.

  7. Money received from the sale of traveler’s checks is usually deposited, by the agent, into a separate bank account. Payment is made to the national company by check, wire transfer, electronic mail, or draft.

  8. National traveler’s checks companies either collect their fee up front when the traveler’s checks are given to the agents, or have their agents remit the fee together with the face amount of the traveler’s checks sold.

  9. Agents may receive commission statements or reconciliations of traveler’s checks sold. The agent’s commission can be accounted for this way.

  10. Although identification of persons purchasing traveler’s checks in amounts under $3,000 is often left to the individual agents, in many instances, the MSB requires identification from the purchaser.

  11. At a minimum, national companies keep a copy of the front and back of all cashed and canceled traveler’s checks.

4.26.9.8.1.1  (06-01-2006)
Private Traveler’s Checks

  1. Generally, private companies maintain and reconcile daily records of traveler’s checks sold. Like checks, traveler’s checks are cleared by a correspondent bank. If adequate records are not maintained, additional information should be obtained from the correspondent bank.

  2. Traditionally, private companies do not require identification to purchase traveler’s checks.

4.26.9.8.2  (06-01-2006)
Law

  1. An issuer of traveler’s checks (other than a person who does not issue such checks in an amount greater than $1,000 in currency or monetary or other instruments to any person on any day in one or more transactions) is defined as an MSB (31 CFR 103.11(uu)(3)).

  2. A seller or redeemer of traveler’s checks (other than a person who does not sell or redeem such checks in an amount greater than $1,000 in currency or monetary or other instruments to any person on any day in one or more transactions) is defined as an MSB (31 CFR 103.11(uu)(4)).

4.26.9.8.2.1  (06-01-2006)
Reporting Requirements

  1. FinCEN Form 104 (CTR) must be filed for all currency transactions of more than $10,000 in one business day. (31 CFR 103.22(b)(1))

  2. Multiple currency transactions must be aggregated and a CTR is required if the business has knowledge that the multiple transactions are by or on behalf of any person and result in either cash in or cash out totaling more than $10,000 in one business day. (31 CFR 103.22(c)(2))

  3. The CTR must be filed within 15 calendar days following the day the reportable transaction occurs. (31 CFR 103.27(a)(1))

  4. Treasury Department Form TD 90-22.56 (SAR-MSB) is required to be made by an MSB if they suspect or have reason to suspect suspicious activities have occurred (31 CFR 103.20(a)).

  5. A SAR-MSB must be filed for suspicious transactions of at least $2,000 in funds or other assets conducted or attempted by, at, or through the money services business (31 CFR 103.20(a)(2)).

  6. To the extent that the identification of suspicious transactions required to be reported is derived from a review of clearance records or other similar records of traveler’s checks that have been sold or processed, an issuer of traveler’s checks shall only be required to report a transaction or pattern of transactions that involves or aggregates funds or other assets of at least $5,000 (31 CFR 103.20(a)(3)).

  7. An MSB is required to file the SAR-MSB with FinCEN, through DCC, no later than 30 calendar days after the date of detection (31 CFR 103.20(b)(3)).

  8. An MSB is prohibited from notifying any person involved in the transaction that a SAR has been filed. (31 CFR 103.20(d)).

  9. FinCEN Form 105 (CMIR) must be filed by any person who transports, mails, or ships or has someone else transport, mail, or ship currency or monetary instruments in excess of $10,000 into or out of the country or who receives such items in the United States from abroad. (31 CFR 103.23)

4.26.9.8.2.2  (06-01-2006)
Registration Requirements

  1. Traveler’s check issuers, sellers, or redeemers are required to register by filing a FinCEN Form 107(formerly TD F 90-22.55), Registration of Money Services Business, and to renew their registration biannually if they are not acting in an agent capacity and are not a branch location (31 CFR 103.41).

  2. Certain events require re-registration which is different from a renewal registration (31 CFR 103.41(b)(4)).

4.26.9.8.2.3  (06-01-2006)
Recordkeeping Requirements

  1. For records required of all financial institutions, refer to IRM 4.26.5.

  2. Copies of all filed CTRs must be retained by the financial institution for five years from the date of the report (31 CFR 103.27(a)(3)).

  3. Copies of all filed SAR-MSBs and the original or record of any supporting documentation shall be maintained by the financial institution for five years from the date of filing the SAR-MSBs (31 CFR 103.20(c)).

  4. Certain records are required to be maintained for the issuance or sale of traveler’s checks involving currency in amounts between $3,000 and $10,000, inclusive, by or on behalf of one individual in one business day. The following information must be obtained:

    1. The purchaser’s name and address;

    2. The purchaser’s social security number or alien identification number;

    3. The purchaser’s date of birth;

    4. The date of purchase;

    5. The type of instruments purchased;

    6. The serial numbers of the instruments purchased; and,

    7. The amount in dollars of each instrument purchased (31 CFR 103.29(a)(2)(i)).

  5. The financial institution is required to verify the purchaser’s name and address and record the specific identifying information (e.g., State of issuance and purchaser’s drivers license number). (31 CFR 103.29(a)(2)(ii))

  6. These records must be retained by the financial institution for five years. (31 CFR 103.29(c))

  7. Copy of registration and renewal must be retained for five years, if applicable.

  8. Current annual agent list and agent list(s) for the past five years (back to January 2002) must be retained, if applicable (31 CFR 103.41(d)).

4.26.9.8.2.4  (06-01-2006)
AML Program Requirements

  1. All MSBs must establish and implement a written, risk-based AML program reasonably designed to prevent the business from being used to facilitate money laundering and the financing of terrorism.

  2. At a minimum, the program shall:

    1. Incorporate policies, procedures, and internal controls reasonably designed to assure compliance with the BSA and its implementing regulations;

    2. Designate a compliance officer;

    3. Provide for education or training of appropriate personnel; and,

    4. Provide for independent review to monitor and maintain the adequacy of the program (31 CFR 103.125).

4.26.9.8.3  (06-01-2006)
Records Commonly Found

  1. Traveler’s checks agents records usually include, but are not limited to:

    1. Inventory sheets of traveler’s checks sold,

    2. Inventory sheets of traveler’s checks received from the issuer,

    3. Inventory sheets of traveler’s checks currently in stock

    4. Bank statements and deposit slips

    5. Teller drawer reconciliations or summaries, and

    6. A copy of the executed trust agreement between the agent and the issuer.

  2. An example of a BSA examination audit trail is shown in Exhibit 4.26.9-29.

4.26.9.8.4  (06-01-2006)
Interview

  1. Ask specific questions relating to the business, area, and services offered. The examiner must consider all services offered by the business, such as money transmitting, check cashing, and sales of money orders. For example, a customer could attempt to launder $15,000 by sending a wire transfer for $8,000 and purchasing $7,000 in traveler’s checks.

  2. Interview the AML compliance officer and compliance program employees, as well as the officers and employees of the traveler’s check issuer, seller, or redeemer to determine their knowledge of the BSA and the financial institution’s procedures to comply with the reporting and recordkeeping requirements. The duties and responsibilities of the officers and employees should be documented along with a description of the financial institution’s records and an explanation of the flow of transactions through the records. Knowledge is one of the elements needed to prove willfulness with respect to violations of the regulations.

  3. Ask the owners or management of the financial institution if they have knowledge of any structuring transactions having occurred, or if any suspicious transactions have occurred. This question should be asked again while interviewing employees who have customer contact.

  4. Interview all individuals who handle currency transactions. Question their knowledge and training of the BSA recordkeeping and reporting requirements.

  5. Ask open-ended questions throughout the interview. Do not ask questions that require only a yes or no answer.

  6. An example of possible initial interview questions for issuers, sellers, or redeemers of traveler’s checks is shown in Exhibit 4.26.9-31. It is only a guide and should be expanded or contracted as each BSA examination warrants.

4.26.9.8.5  (06-01-2006)
Review of the Records

  1. Any records the financial institution maintains that are relevant to the BSA examination can be requested and reviewed. The examiner will determine if the financial institution is maintaining adequate records and must document any recordkeeping violations.

  2. Review the written policy statements, procedures, etc. of the financial institution as they relate to the BSA.

  3. Analyze the records of the financial institution for all types of financial services offered. Each type of financial service should be examined separately.

  4. Determine the traveler’s check register completeness by reconciling it to the summary sales reports sent to the issuing company, the discrepancy report from the issuing company, and the bank deposits.

  5. Trace large block sales or large dollar single transaction sales of traveler’s checks in the traveler’s check register or close out reports to the records required for recordkeeping, SAR reporting and CTR reporting. Block sales are a group of sequentially numbered traveler’s checks sold concurrently for the maximum denomination. The review should identify: a. Blocks of traveler’s checks at $2,000 or right below for SAR reporting; b. Blocks of traveler’s checks at $3,000 to $10,000, inclusive, for recordkeeping requirements; and, c. Blocks of traveler’s checks greater than $10,000 for CTR reporting.

  6. Inspect any copies of traveler’s checks retained by the NBFI.

  7. Request that the NBFI obtain copies of traveler’s checks from the traveler’s check issuer for any questionable or suspicious transactions. It may be necessary to issue a Title 31 summons to obtain this information. Refer to IRM 4.26.8 before issuing any Title 31 summons.

  8. Review the NBFIs records to determine if all the required information on the cash purchasers of traveler’s check sales involving currency in amounts of $3,000 to $10,000, inclusive, has been maintained and verified pursuant to the recordkeeping requirements of 31 CFR 103.29.

  9. It is recommended that a computer database be used when the examination is part of a multiple location local project or there are a large number of block sales or large dollar sales. All transactions exceeding the elected dollar cutoff should be entered in the database, from source documents, to see if the transactions are related.

  10. Analyze database sorts of the name field and the address field to detect possible structured transactions, unreported transactions, errors, and deficiencies in the financial institution’s BSA compliance system.

  11. The databases, if applicable, of BSA examinations of nearby financial institutions in geographical targeting projects should be consolidated and sorted to detect related structuring activity occurring at more than one location.

  12. Review copies of CTRs filed by the financial institution to ensure they are accurate and complete. Ensure filed CTRs have been retained by the financial institution for the required five-year period. Use the CBRS database to verify that the CTRs were timely filed and contain the same information as the copies maintained by the financial institution.

  13. Query the CBRS database for transactions conducted by owners, managers, and employees of the financial institution to detect possible unreported transactions of the financial institution that were instead reported under the individual’s name.

  14. If structured transactions or BSA violations are detected, the examiner should interview the responsible person or employee who conducted the transaction. Based on the answers given, the examiner should consider expanding the scope of the examination. (Refer to IRM 4.26.6.) All facts should be discussed with the BSA Group Manager.

  15. Review relevant audit reports or reviews that address BSA policies, procedures, or operations for BSA issues.

  16. Follow procedures in IRM 4.26.6 to timely conclude the BSA examination.

  17. Prepare Form(s) 5346, Examination Information Report, when information is obtained during the BSA examination that indicates a possible income tax violation warranting referral. (See IRM 4.26.6.) Keep in mind, however, that the primary purpose of the BSA exam is not to detect Title 26 violations.

  18. Review copies of filed MSB registration and renewal forms (if applicable) for accuracy and completeness.

  19. Determine if the business is required to register.

  20. Review agent list (if applicable) for all required elements.

  21. Forward agent list to BSA Workload Selection coordinator in a separate shipment from the case file.

  22. Review agent contracts and terms for acceptance and termination as an agent.

  23. Review all agents rejected or terminated as an agent and forward list to BSA Workload Selection coordinator in a separate shipment from your case file.

4.26.9.8.6  (06-01-2006)
Evidence

  1. The examiner must obtain adequate supporting documentation for each type of the following violations:

    1. Reporting – The date of the transaction, the amount, the individuals involved, and a detailed statement regarding the violation, including copies of source documents such as cash in/out slips, control registers, and teller cash proofs which document the violation.

    2. Recordkeeping – the details of the specific records which were not maintained or were inadequate, including management’s response to the violations.

  2. The MSBs knowledge of BSA requirements must be determined before determining whether violations should be formally referred to FinCEN.

    1. The key officers and employees should be interviewed again to document the business’ response to any apparent violations.

    2. The existence of an internal compliance program may indicate of knowledge. For example, if knowledge of the reporting and recordkeeping requirements is limited to upper management and the other employees are not similarly educated, the business may be at least negligent (for not properly instructing their employees.) The employees need to know what their BSA obligations are. The employees are the initial contact point where the information is obtained. Failure by upper management to ensure that factual information is correctly gathered may indicate the business’ intent not to comply.

  3. Other factors that may indicate the MSB's knowledge of the BSA registration, reporting, recordkeeping, and compliance program requirements, and its compliance intentions are:

    1. Prior BSA violations and BSA related contacts with the IRS;

    2. Training programs offered by the business;

    3. The MSB's formal BSA compliance procedures; and,

    4. Active involvement of management in oversight and internal control activities.

  4. In situations where knowledge cannot be determined within the scope of selected records, the examiner should expand the period to include recent transactions that occurred after knowledge can be clearly documented. For example, an examiner initially selects records from January, February, and March. Inspection of these records discloses currency transactions that appear to be structured and which should have been reported. The business denies knowledge of the structuring regulations during the initial interview. In April, the examiner informs the business about suspicious transactions and of the structuring regulations. The examiner then expands the examination period to include May and June transactions. The examiner finds violations in May and June. The business’ knowledge was documented during the April notification, yet it took no action to prevent the recurrence of violations. The business’ intentional noncompliance should be documented.

  5. Because willfulness is a state of mind, generally only circumstantial evidence of willfulness will be available. A willful violation is the intentional violation of a known legal duty.

  6. Since BSA penalties are assessed by the FinCEN, which does not have any field examiners, the examiner must thoroughly document all facts on the issue of willfulness. After the examiner secures the necessary information and documents the apparent violations, the examiner should follow the procedures detailed in IRM 4.26.8.

4.26.9.8.7  (06-01-2006)
Traveler’s Check Business’ Position

  1. After documenting the potential violations, the examiner should provide a list of the violations to the money services business and solicit a written explanation for each of the violations identified. The list should include:

    1. Date of the transaction;

    2. Customer name;

    3. Account number (if any);

    4. Serial number of the traveler’s check(s) involved;

    5. Amount of the currency transaction(s); and,

    6. Description of the transaction(s).

  2. The examiner should advise the MSB of any recordkeeping deficiencies as well as any deficiencies in their policies, procedures, internal controls, and compliance programs that might result in noncompliance with the BSA.

  3. Any additional documents or information provided by the MSB in response should be reviewed and a determination should be made as to whether any items should be removed from the list of violations.

  4. When the MSB contends that a CTR was filed and provides its retained copy as evidence, the examiner should query the CBRS database and conduct an exhaustive search before concluding that a CTR was not received. In conducting the search, the examiner should query all customer numerical identification on the CTR such as account number (if applicable), SSN, and identification credential number.

4.26.9.8.8  (06-01-2006)
Money Laundering Trends

  1. The financial institution and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the financial institution and the transactor(s) during the BSA examination.

  2. Money laundering techniques, which could be used by the financial institution, include:

    1. Failing to maintain complete records

    2. Failing to record specific transactions

    3. Failing to obtain the required information to comply with the recordkeeping requirements

    4. Failing to file CTRs, SAR-MSBs, or CMIRs on reportable transactions

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions

    2. Using several individuals at one or more locations to conduct a transaction

    3. Using aliases when conducting transactions

    4. Conducting several transactions at the same location at different times during one day.

  4. When evidence of a money laundering scheme is uncovered, a referral should be made on Form 5104. (See IRM 4.26.8for referral procedures.)

4.26.9.8.8.1  (06-01-2006)
Examination Techniques

  1. The following techniques can be useful in uncovering money laundering schemes:

    1. Review the financial institution’s sales logs, inventory sheets, and /or daily summaries for block purchases. Trace these purchases to records of sales of $3,000 or more.

    2. Request copies of traveler’s checks from the issuer, if necessary, to determine if transactions have been structured.

    3. Conduct BSA examinations of financial institutions within the same geographical area.

    4. Create a database to consolidate transactions of the financial institutions, which can be sorted to identify related transactions.

Exhibit 4.26.9-1  (01-01-2003)
Organizational Structure of a Gambling Casino

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Exhibit 4.26.9-2  (01-01-2003)
Computerized Casino Management System

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Exhibit 4.26.9-3  (06-01-2006)
Letter 3494, Appointment Letter for Casinos

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Exhibit 4.26.9-4  (06-01-2006)
Information Document Request for Casino

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Exhibit 4.26.9-5  (06-01-2006)
Interview for Casino

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Exhibit 4.26.9-6  (01-01-2003)
Analysis of Incomplete CTRCs Filed

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Exhibit 4.26.9-7  (01-01-2003)
Daily Listing of CTRCs Filed

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Exhibit 4.26.9-8  (01-01-2003)
Daily Listing of CTRCs Actually Filed

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Exhibit 4.26.9-9  (01-01-2003)
Daily Listing of Customers’ Cash-In Transactions

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Exhibit 4.26.9-10  (01-01-2003)
Daily Listing of Customers’ Cash-Out Transactions

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Exhibit 4.26.9-11  (01-01-2003)
Daily Listing of Customers with Cash-In Transactions

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Exhibit 4.26.9-12  (01-01-2003)
Meanings of Abbreviations

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Exhibit 4.26.9-13  (01-01-2003)
Typical Organization Chart for a Check Casher

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Exhibit 4.26.9-14  (01-01-2003)
Check Casher Audit Trail

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Exhibit 4.26.9-15  (01-01-2003)
Information Document Request for a Check Casher

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Exhibit 4.26.9-16  (01-01-2003)
Interview for a Check Casher

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Exhibit 4.26.9-17  (01-01-2003)
Credit Union Audit Trail

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Exhibit 4.26.9-18  (01-01-2003)
Information Document Request for a Credit Union

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Exhibit 4.26.9-19  (01-01-2003)
Interview for a Credit Union

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Exhibit 4.26.9-20  (01-01-2003)
Currency Dealer or Exchanger Audit Trail

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Exhibit 4.26.9-21  (01-01-2003)
Information Document Request for a Currency Dealer or Exchanger

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Exhibit 4.26.9-22  (01-01-2003)
Interview for a Currency Dealer or Exchanger

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Exhibit 4.26.9-23  (01-01-2003)
Money Order Audit Trail

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Exhibit 4.26.9-24  (01-01-2003)
Information Document Request for a Money Order Business

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Exhibit 4.26.9-25  (01-01-2003)
Interview for a Money Order Business

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Exhibit 4.26.9-26  (01-01-2003)
Money Transmitter Audit trail

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Exhibit 4.26.9-27  (01-01-2003)
Information Document Request for a Money Transmitter

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Exhibit 4.26.9-28  (01-01-2003)
Interview for a Money Transmitter

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Exhibit 4.26.9-29  (01-01-2003)
Traveler's Check Audit Trail

Exhibit 4.26.9-30  (01-01-2003)
Information Document Request for a Traveler's Check Business

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Exhibit 4.26.9-31  (01-01-2003)
Interview for a Traveler's Check Business

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