1. Challenges and Opportunities in the Caribbean Financial Services Sector Rudolph F. Zepeda, Jr. Federal Reserve Bank of Atlanta Miami Branch

2. Opportunities  Know your customer allows the bank to have an in depth knowledge of their business and the opportunity to tailor new banking services to their customer  Maintain good Correspondent Bank relationships without having to answer more questions on customer transactions.

3. Challenges  Keeping up with the U.S. regulatory changes and their impact on correspondent banking relationships and domestic customers doing international business in the U.S. (i.e. Rule 312)  Avoiding transactions in businesses or with parties that have been designated by U.S. regulators as requiring higher scrutiny

4. Rule 312 of the Patriot Act U.S. banks must establish appropriate, specific and, where necessary, enhanced due diligence policies, procedures, and controls that are reasonably designed to enable the financial institution to detect and report instances of money laundering through the foreign correspondent banking accounts

5. Challenges of Rule 312 (effective September 10, 2007)  The rule states that U.S. financial institutions with correspondent foreign bank accounts must identify, for due diligence purposes : the owners if their shares are not publicly traded ascertain whether such banks provide correspondent accounts to other foreign banks thereby providing them with access to the U.S. financial system.

6. Challenges of Rule 312 (effective September 10, 2007)  In making their risk assessments U.S. banks should consider, among other factors: the nature of the foreign banks’ business, reasonably-available information on the foreign banks’ anti-money laundering record, and information on the nature of the foreign supervisory regulations under which the bank is operating.

7. Where to go for Help? FINCEN and the Updated BSA/AML Examination Manual available on line. http://fedweb.frb.gov/fedweb/bsr/srlt rs/SR0715.htm

8. Revisions in the 2007 Bank Secrecy Act/AML Exam Manual  The major change was the inclusion of Remote Deposit Capture (RDC)- Electronic Banking Section  Further clarifications and footnotes on BSA/AML Compliance Program for Banks Customer Due Diligence & CIP Updates & SAR’s Foreign Correspondent Bank Accounts Funds Transfer and Settlement OFAC Screening

9. Revisions in the 2007 Bank Secrecy Act/AML Exam Manual Privately owned ATM’s Trade Finance Activities (a New Standard on validity of trade letters of credit---necessity to understand the underlying transaction) Private Banking Politically Exposed Persons (PEP’s) Services to Money Service Businesses AML & Terrorist Financing Red Flags An Index

10. FINCEN  FinCEN launches new search engine- The new search engine allows the users to search through more than 220 file types including forms and regulations. (8/20/07) http://www.fincen.gov/search_engine.html  FinCEN Issues Final Rule for Section 312 of USAPA- The final rule clarifies the risk-based procedures that U.S. financial institutions should use in tailoring their enhanced due diligence to assess the risks of some foreign banking relationships. (8/8/07) http://www.fincen.gov/Section_312_Enhanced_ DD.html