In today's complex regulatory environment, banks are required to comply with a variety of regulations. Under the Bank Secrecy Act (BSA), certain financial institutions are required to file Suspicious Activity Reports (SARs) as well as Currency Transaction Reports (CTRs) with the federal government. The Department of Treasury's Financial Crimes Enforcement Network (FinCEN), whose mission is to help safeguard the financial system from financial crime, administers the suspicious activity reporting regulatory program.
Many institutions file these reports manually, representing a tremendous investment in labor and mailing costs. However, in October 2002, FinCEN created the ability for free electronic filing of these forms. According to FinCEN, approximately 60 percent of all BSA forms are now being submitted electronically through FinCEN's BSA E-Filing System, which supports electronic filing of forms either individually or in batches through a secure network.
JPMorgan Chase (New York; $1.4 trillion in assets) has taken e-filing a step further by centralizing the process within the organization using a single system to prepare and file SARs. All investigative units within JPMorgan Chase are centralizing the SAR filing effort into a single, internally developed system.
Improved Control and Lower Costs
Centralization of SAR data offers more robust control, reporting and analysis, as well as lower costs and improved efficiency. Mailing the reports had cost the bank about $250,000 per year. (According to FinCEN, maintaining e-filing operations costs the government 11 cents per form, a figure that will go down as more organizations e-file.) Electronic filing also provides for data and transmission encryption as well as secure receipt acknowledgement from FinCEN.
After an eight-month implementation, JPMorgan Chase went live with the system in late September. The firm expects to expand its centralized electronic filing initiative wherever possible to further improve efficiency gains.
The technology behind the e-filing functionality consists of an internally developed case management system that allows global enterprise users to input, track and report individual events and cases related to potential money laundering, internal fraud and compliance matters. The system is a Web-based, three-tier application written in J2EE (using the MyFaces Web application framework) with an Oracle (Redwood Shores, Calif.) database engine, all housed in an enterprise shared infrastructure for cost reduction and service efficiency.
Within the application, role-based security segregates internal workgroups, ensuring that individual departments have access only to their assigned events and cases. The system also has several internal data feeds into the database to provide maximum automation. The application allows users to attach supporting documentation and automatically prepopulate key data fields during the SAR creation effort. Prior to the release of a SAR to FinCEN, quality control processes allow enhanced management oversight and audit control.
Once a SAR is approved for release, the system stores the data in Adobe (San Jose, Calif.) Acrobat PDF format. The system then assimilates the approved SAR data fields into a nightly batch process, sending the data to a central mainframe and then onto FinCEN. The connection between JPMorgan Chase and FinCEN is a secure Virtual Private Network (VPN) tunnel with data encryption to ensure complete transmission and data security. The project, which required extensive collaboration within JPMorgan Chase as well as FinCEN, provides a solid foundation for future technology and compliance business achievements to meet the growing needs of the financial industry's regulatory environment. q
Michael Powers is a certified project management professional. He serves in the legal and compliance technology division of JPMorgan Chase.