Western Independent Banker - January/February 2008 - (Page 26) matrix. The OFAC risk assessment should be updated periodically when any of the risk criteria changes. Failure to Check Transactions Based on the Bank’s Risk The purpose of preparing an OFAC risk assessment is to implement policies consistent with the bank’s risk profile. OFAC rules cover all banking transactions; they have no thresholds or limits. A bank must decide how all transactions will be handled—those that are automatically processed and those that are not. • Interdiction software is often used to scan a bank’s customer database as well as to check parties to wire transfers. However, manually handled payment processes also should be covered in the policies, including a check of nonaccountholders, such as account signors, guarantors, trustees, beneficiaries, or third party payees, such as recipients of loan proceeds. • Monetary instrument payees—even when purchased by customers. • Check cashing—“on us” checks cashed for non-customers. • Vendors and expense check payees. All transactions should be evaluated for risk and procedures established based on the level of risk they carry. For example, a bank may not check on every $25 on-us check cashed in the bank’s lobby, but it is a good practice to check on checks cashed for large amounts. Failure to Use Updated and Complete Lists Transactions involving members of the Palestinian Liberation Council (PLC) must be rejected by U.S. financial institutions. The members of the PLC are not on the SDN list, so if a bank using only the SDN list might process a transaction that should be rejected. The SDN list is updated periodically. Failing to update lists or use the latest version is a compliance deficiency. Banks should also understand the tolerance settings and filters on their OFAC software. Most filters are phonetic and should be sensitive enough to catch names that are close. Conclusion While OFAC is not legally a part of BSA/AML compliance, it is covered in BSA examinations and will continue to receive a high level of scrutiny. A sound BSA/ AML program includes a well-documented OFAC risk assessment and policy. A compliance officer should know OFAC regulations and sanctions. Regulatory ewxpertise and the establishment of internal controls to mitigate OFAC risk are the essence of a successful, and robust OFAC compliance program. Lyn Farrell is the managing director of risk management services for Sheshunoff Management Services, L.P. She can be reached at 512- 426 -1686 or lfar rell@ smslp.com. 26 358355_BMA.indd 1 www.wib.org Western Independent Banker 12/3/07 3:53:49 PM http://www.bmacorp.com http://www.wib.org
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