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Board Report: 2017-SR-B-003 March 15, 2017
International banks have been fined billions for violating U.S. sanctions programs by transferring funds—either knowingly or unknowingly—to and from terrorists, drug traffickers, or countries like Syria. Such actions violate rules established by Treasury's Office of Foreign Assets Control. We evaluated how Federal Reserve examination teams assess the OFAC compliance programs that banks set up to prevent such violations.
Examination manuals do not set minimum requirements for documenting key steps in the OFAC examination process. We found, for example, that some examination workpapers lacked documentation to support a team's conclusions about a bank's compliance program. We also found data reliability concerns in the National Examination Database regarding whether OFAC compliance had been reviewed as part of broader bank examinations. Thorough, consistent documentation would help ensure more efficient and effective bank supervision.
Our report contains recommendations to address these findings.