BSA Hot Topics. Presented to: New York Bankers Association. May 2015

Transcription

1 BSA Hot Topics Presented to: New York Bankers Association May 2015 Certified Public Accountants Consultants Wealth Management Technology

2 Agenda Customer Risk Rating Methodology Risk-based approach Validating customer profiles Enhanced Due Diligence Periodic monitoring BSA System Rules Adequacy and Alert Clearing Process

3 Customer Risk Rating Methodology Risk-based approach Factors to consider for individual, business customers: Geography/location Volume of anticipated transactional activity North American Industry Classification System (NAICS Code) (Business) Standard Occupational Classification (SOC Code) (Individual) Type of customer (Individual) Products/services offered by customer and business type Length of relationship

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5 Geography/Location Footprint of Bank Customers serviced and their location

6 Anticipated Transactional Activity Volume Assess customer base and average activity to set baseline. Use baseline to set parameters for low, medium, high for individuals and businesses. Consider high-risk activity types, such as cash and domestic and international wire transfers. Can expand to all types, including checks, ACH, internal transfers.

7 NAICS/SOC Utilize FFIEC BSA/AML Manual to determine higher-risk industries and occupations. NAICS Codes SOC Codes

8 Type of Customer and Products/Services Offered Individual Elderly/disabled Politically-exposed person Business Sole proprietorship, partnership, LLP, LLC, Corp Charitable organization, ATM, NBFI, Deposit Broker, etc.

9 Length of Relationship 2 points of view The longer the length of relationship, the more comfortable the bank is with the customer activity. The longer the length of relationship, the more comfortable the customer is with the bank and likely to launder money.

10 Customer Rating Methodology

11 Frequency Account opening CDD Reassess periodically through alert monitoring or EDD review. Bank-wide customer re-assessment from BSA system.

12 Profile Validation Validate customer profile within a period after account opening. Site visits Internet searches for negative news Comparing anticipated activity to actual Confirm risk rating methodology was properly completed

13 Enhanced Due Diligence (EDD)

14 What to Include in EDD Review Background of customer Customer s customers and vendors Derogatory information, if any Comparison of anticipated vs. actual activity Source/use of funds Conclusion on reasonableness of activity in the period under review

15 Scheduling EDD Approach varies Entire customer base can be reviewed in each EDD review performed, if feasible. Otherwise, review can be broken out by risk of customer; higher high-risk customers reviewed more frequently Quarterly Semi-annually Annually

16 Customer Progression and High-Risk List A customer should consistently demonstrate lowrisk activity for consecutive EDD periods. Should not change every EDD review. There should be proper documentation justifying change in risk. Some regulators think once high risk always high risk. Proceed with caution.

17 EDD Alerts Alert/case documentation can be leveraged when completing an EDD review. Background of customer. Investigation of alert and reason for clearing due to activity deemed reasonable for customer. EDD can be leveraged in the alert clearing process.

18 High-Risk Customers Certain customers automatically should be considered high risk and monitored frequently. Those with privately-owned ATMs. Those that had SARs filed within the past 1 year. All customers included in the SAR are high risk. MSBs PEPs

19 BSA System Rules Adequacy and Alert Clearing Process

20 Transactions Validating transactions from the core to the AML/BSA software to ensure completeness of transactions monitored. Proper transaction codes associated with activity: Split Deposits Check cashing

21 Monitoring Environment Risk-based approach of monitoring customers manually or through BSA/AML suspicious activity monitoring software. Automated environment - Setting parameters to appropriately capture individuals vs. businesses. Manual environment - Being aware of resources to develop processes to monitor transactional activity.

22 Effectiveness Ensure optimization of rules in an automated environment to ensure effectiveness of monitoring in an efficient manner. Factors to consider in performing this analysis include an alert to case to SAR ratio.

23 Alert Clearing Process Describe the transaction(s) that alerted. What is the transaction? Does it appear reasonable for type of business or occupation of individual? What are source and use of funds? Background of customer (can leverage prior alerts, cases, or EDD). Conclude whether it appears reasonable or escalated to a case for further analysis.

24 Questions

25 Contact Holly Kimball, Vice President & BSA/AML Officer, The Dime Savings Bank of Williamsburgh (646) Salvatore Zerilli, CPA, CAMS, Managing Director, The Mercadien Group (609)