Introductory BSA/AML Examiner School, Atlanta, CA

Bank of Smithville USA

Page 15

BSA Officer Marks projected that the case backlog will be eliminated by December 31, 20XX.

Review of Monetary Instruments The review of cashier’s checks needs to be comprehensive. The previous examination recommended that a review of larger outstanding cashier’s checks be performed if those checks had not been negotiated within six months of issuance. For the BOS cashier’s check account, management began reviewing larger cashier’s checks outstanding nine months or more. Management had not performed any review of the outstanding cashier’s checks for the two recently merger institutions (HILL and CSB). These issues produced systemic issues of failure to file SARs for transactions with no business or apparent lawful purpose and seven instances of failure to file SARs for activity designed to evade CTR reporting requirements. During the review, BSA Officer Marks initiated numerous cases for the issues identified relating to cashier’s checks and committed to the review of larger cashier’s checks that have The EDD program, specifically relating to the monitoring of POATMs, requires additional attention. Management has effectively identified those customers that process POATM activity through their accounts; however, processes to monitor the appropriateness of POATM activities have not been effective. Effective monitoring should form a relationship between incoming ACH transactions, representing cash withdrawals from the ATM, with debits that represent the replenishment of the ATM, either through cash withdrawals or transfers to other accounts of the customer. Many of the current relationships reflect POATM activity intermingled with operational funds, providing no indication as to the source of funds used to replenish the ATM. Isolation of ATM activity provides an effective method of monitoring POATMs and determining if the relationship between ATM withdrawals and funds used to replenish the ATM are reasonable. This is a repeat recommendation from the previous examination. EDD reviews of high-risk customers have improved and appear relatively comprehensive; however, in lieu of the current annual schedule, reviews should be conducted on a more frequent basis. CFO Moore stated that management is requiring a separate POATM account for new customers and that existing customers with POATMs will be required to establish separate accounts for ATM activity by September 30, 20XX. BSA Officer Marks stated that, for high- risk customers not subject to continued SAR filings, EDD reviews will be conducted semi- annually. Monitoring of Activity not Alerted by Verafin The Verafin threshold for generating a reviewable alert is a score of 75. The system is designed to alert based on the “flow of funds” methodology, which compares customer debits and credits been outstanding six months or more. Enhanced Due Diligence Program (EDD)