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[12.05.06]
Independent review & testing for
BSA/AML compliance
By using the words "independent
testing" and "independent audit" interchangeably, financial services
professionals might have engendered the position that a recognized auditing
firm must perform the independent testing of an institution's BSA/AML
compliance condition.
Undoubtedly, the professional
auditor trained in observing the efficiency of an institution's financial
procedures, accounting systems, internal financial controls and overall
administration and management, may be able to conduct the required testing for
BSA/AML compliance. However, the professional competence of this auditor may
have to be reinforced by such other attributes as his or her:
- Working knowledge of the requirements of the
Bank Secrecy Act and its implementing regulations
- Ability to evaluate the money
laundering/terrorist financing risks associated with the institution's
products, services, customer base and geography
- Hands-on experience in identifying unusual
transactions or suspicious activities not otherwise detected by the
institution's transactions monitoring/internal control systems.
It is instructive to note that
any reference to an independent testing for or an independent audit of an
institution's BSA/AML program does not mean that a specifically designated
auditor must perform the review and testing. The FFIEC BSA/AML Examination
Manual states that:
"The federal
banking agencies' reference to "audit" does not confer an expectation that the
required independent testing must be performed by a specifically designated
auditor, whether internal or external. However, the person performing the
independent testing must not be involved in any part of the bank's BSA/AML
compliance program. The findings should be reported directly to the board of
directors or an audit committee composed primarily or completely of outside
directors." (FFIEC BSA/AML Examination Manual, p.12)
Bascom Consulting Inc.
professionals, with training and experience in bank regulation and supervision,
bank management and operations, and financial institutions' BSA/AML and other
compliance areas, have conducted independent testing for compliance for banks
and money services businesses. In the review and testing process, they have
applied statistical sampling techniques, assessed the institutions' internal
controls and all other components of their BSA/AML risk-based programs,
provided an overall rating of the institutions' compliance condition, and
presented the findings to the institutions' board of directors by way of a
comprehensive report and detailed discussions.
Additional information on
independent testing for BSA/AML compliance may be obtained by contacting Dr.
Wilbert O. Bascom, principal consultant at Bascom Consulting, Inc. at
WOBascom@bascomconsulting.com.
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