For immediate release

The Federal Reserve Board today announced guidelines on sound risk management practices for private banking activities such as personalized investment services for selected customers. Private banking activities also involve money management and financial advice for high net worth clients, and have become an increasingly important aspect of some large, internationally active banking organizations. The Federal Reserve Bank of New York recently conducted a comprehensive review of private banking activities at approximately 40 domestic and foreign banking organizations in its district to enhance the Federal Reserve's understanding of private banking operations. Examiners assessed each institution's ability to recognize and manage the potential reputational and legal risks that may be associated with inadequate knowledge and understanding of its clients' personal and business backgrounds. The review has resulted in these policy guidelines on sound practices to provide banking organizations with guidance on basic controls necessary to minimize reputational and legal risk and to deter illicit activities such as money laundering. The essential elements associated with these sound private banking activities include: Management Oversight; "Know Your Customer" Policies and Procedures; Risk Management Practices and Monitoring Systems; Segregation of Duties, Compliance, and Audit; and Other Related Projects and Products. Additionally, the Federal Reserve will also distribute an updated Bank Secrecy Act examination manual in the next few weeks. The updated manual will include examination procedures relating to recent additions and changes to the Bank Secrecy Act, as well as updated sections relating to anti-money-laundering initiatives. The Federal Reserve's guidelines on sound private banking activities are attached.

Attachment

1997 Banking and consumer regulatory policy