DCCA conducts consumer supervision and oversight of community development programs, research, and policy analysis, as well as implements relevant statutory requirements for community reinvestment. Through these efforts, the division works to ensure that consumer and community perspectives inform Federal Reserve policy, research, and actions that advance DCCA's mission to promote a fair and transparent consumer financial services marketplace and effective community reinvestment. Throughoutthe division engaged in numerous consumer and community-related functions and policy activities in the following areas: Formulating consumer-focused supervision and examination policy to ensure that financial institutions for which the Federal Reserve has authority comply with consumer protection laws and regulations and meet requirements of community reinvestment laws and regulations.
Whatever format management chooses to use for its risk assessment, it should be easily understood by all appropriate parties. If the bank has not developed a risk assessment, this fact should be discussed with management. For the purposes of the examination, whenever the bank has not completed a risk assessment, or the risk assessment is inadequate, the examiner must complete a risk assessment based on available information.
The assessment of risk factors is bank-specific, and a conclusion regarding the risk profile should be based on a consideration of all pertinent information. Banks may determine that some factors should be weighed more heavily than others.
For example, the number of funds transfers is certainly one factor to be considered in assessing risk; however, in order to effectively identify and weigh the risks, the examiner should look at other factors associated with those funds transfers, such as whether they are international or domestic, the dollar amounts involved, and the nature of the customer relationships.
Identification of Specific Risk Categories The first step of the risk assessment process is to identify the specific products, services, customers, entities, and geographic locations unique to the bank. Although attempts to launder money, finance terrorism, or conduct other illegal activities through a bank can emanate from many different sources, certain products, services, customers, entities, and geographic locations may be more vulnerable or have been historically abused by money launderers and criminals.
Depending on the specific characteristics of the particular product, service, or customer, the risks are not always the same. Various factors, such as the number and volume of transactions, geographic locations, and nature of the customer relationships, should be considered when the bank prepares its risk assessment.
The differences in the way a bank interacts with the customer face-to-face contact versus electronic banking also should be considered. Because of these factors, risks will vary from one bank to another. The expanded sections in this manual provide guidance and discussions on specific lines of business, products, and customers that may present unique challenges and exposures for which banks may need to institute appropriate policies, procedures, and processes.
Products and Services Certain products and services offered by banks may pose a higher risk of money laundering or terrorist financing depending on the nature of the specific product or service offered.
Such products and services may facilitate a higher degree of anonymity, or involve the handling of high volumes of currency or currency equivalents. Some of these products and services are listed below, but the list is not all inclusive: Electronic funds payment services — prepaid access e.
Private banking domestic and international. Trust and asset management services.
Refer tothe expanded overview section, "Purchase and Sale of Monetary Instruments," pagefor further discussion on risk factors and risk mitigation regarding monetary instruments. Foreign correspondent accounts e. Services provided to third party payment processors or senders. Special use or concentration accounts.
Lending activities, particularly loans secured by cash collateral and marketable securities. Nondeposit account services e. The expanded sections of the manual provide guidance and discussion on specific products and services detailed above.
Customers and Entities Although any type of account is potentially vulnerable to money laundering or terrorist financing, by the nature of their business, occupation, or anticipated transaction activity, certain customers and entities may pose specific risks. At this stage of the risk assessment process, it is essential that banks exercise judgment and neither define nor treat all members of a specific category of customer as posing the same level of risk.
In assessing customer risk, banks should consider other variables, such as services sought and geographic locations. The expanded sections of the manual provide guidance and discussion on specific customers and entities that are detailed below: Foreign financial institutions, including banks and foreign money services providers e.
Nonbank financial institutions e. Senior foreign political figures and their immediate family members and close associates collectively known as politically exposed persons PEP.
Persons ," pageand expanded overview, "Politically Exposed Persons," pagesfor additional guidance. Deposit brokers, particularly foreign deposit brokers. Nongovernmental organizations and charities foreign and domestic. Professional service providers e. Higher-risk geographic locations can be either international or domestic.
International higher-risk geographic locations generally include: Countries subject to OFAC sanctions, including state sponsors of terrorism. Countries identified as supporting international terrorism under section 6 j of the Export Administration Act ofas determined by the Secretary of State.Access our entire database of online practice materials and prepare for any job assessment test you may face with focused PrepPacks™.
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Learn more. Getting Started. Specifically, certain large credit card issuers are no longer reporting customer credit lines or high credit balances or both. In addition, some lenders, as a general practice, have not reported any loan information on subprime borrowers, including payment records.