Introductory BSA/AML Examiner School, Atlanta, CA

Bank of Smithville USA

Page 17

mergers, which were scheduled for February 20XX; however, those mergers were delayed until July 20XX. A staffing study was performed by Dominion Consulting Group (Dominion) in April 20XX and stated that the department, even with the mergers, was well understaffed and at a minimum, should likely contain approximately 30 full-time equivalents. In October 20XX, as Verafin alert volume began to build, management contracted with Dominion to provide four individuals to perform alert analysis. An additional two positions were added prior to year-end 20XX. A 20XX budget request was made to increase staffing by an additional 10 positions. At the April 17, 20XX joint visitation, permanent staffing had been increased to 19 positions, with three additional positions filled, leaving four vacancies. At that point, the alert and case backlogs were 4,309 and 1,917, respectively. In order to resolve the backlogs, BSA Officer Marks stated that management was considering contracting with AML RightSource. A contract was approved on May 12, 20XX for AML RightSource to provided approximately 15 full-time equivalents to review 1,100 investigative and 400 behavioral cases, with work commencing in early June 20XX. At the beginning of the review, management had filled all 26 authorized positions. While the alert backlog declined to 1,482 items, the case backlog increased to 2,208, with over 1,300 investigative and 900 behavioral cases. Over 150 of the investigative cases were initiated prior to February 20XX, with the oldest as of November 29, 20XX. The AML RightSource contract was extended to include an additional 800 investigative and 250 behavioral cases. At the exit meeting, management disclosed that the alert backlog has been eliminated and that the case backlog has declined to approximately 1,440. It appears that management has not addressed BSA department staffing needs in a timely manner, resulting in the various internal control issues. The two merged entities, while having combined assets of less than half of BOS, maintained combined BSA departments of more than twice the BSA department staff of BOS. Shortfalls have resulted in late SAR submissions, failure to adequately monitor monetary instruments, and EDD weaknesses. CFO Moore disagreed with the staffing assessment, stating that he felt management had been proactive in supplying personnel resources. He stated that examinations and independent audits prior to 20XX had not disclosed any BSA-related issues, leaving management to believe that the BSA program was adequately staffed. Risk Assessment The risk assessment has been updated to include the recently merged institutions and updated to include quantitative analysis of the products and services provided. During the review, risk ratings for strategic risk and identification of suspicious activity/SAR reporting were adjusted because they appeared to be understated. Overall strategic risk was adjusted to elevated from moderate due to the expansion of the bank’s geographic footprint. Identification of suspicious activity/SAR reporting was increased to high until current issues relating to backlogs, untimely SAR filings, and the enhancement of the review of monetary instruments is resolved.