2020 Journal of Community Bank Studies

2020 COMMUNITY BANK CASE STUDY COMPETITION

who provides standards for similarly sized community banks. These standards are altered for common transactions such as check kiting and elder exploitation to decrease false-positive rates. Check kiting occurs when a person has multiple checking accounts with different banks and takes advantage of unprocessed funds or “float” by moving it back and forth (Walsh). This action creates the effect that the individual has more money in their account than they should. Further, elder exploitation is a type of fraud that tricks elders into spending resources on scams. By covering these common transactions, F&M Bank often does not have to change its parameters. In fact, during the twelve years the SVP has been with the bank, it has only changed them once. That change occurred in 2012 with the introduction of remote deposit transactions. These parameters are set with the objective of catching all instances of fraud. However, F&M Bank’s systems often flag legitimate transactions. These transactions are known as false positives. Despite the false positive rate, the system accomplishes its goal, which permits the BSA compliance team to examine flagged transactions. F&M conducts annual risk assessments in March, which differ from the daily control associated with risk parameters and individual transaction monitoring. This assessment allows F&M to analyze emerging transaction trends and identify abnormal wire transfer patterns. 2.4 Recent Changes in F&M BSA Policy One of the primary consequences of the Bank Secrecy Act on community banks is de-risking.

When setting risk parameters, F&M

works primarily with a third-party processor who provides standards for similarly sized community banks.

daily transactions. The other, more senior team member looks at things on more of an aggregate level, analyzing statistics and searching for patterns. F&M Bank’s BSA compliance team does not work under its compliance department. Instead, its BSA compliance team is housed within F&M Bank’s deposit operations department due to the BSA expertise of the SVP of Deposit Operations. This arrangement allows for the compliance team to be in close proximity to deposit operations and improves communication between the groups. 2.3 F&M Risk Assessment Risk parameters are the settings the bank inputs into its systems to determine which transactions are automatically flagged for further review. When setting risk parameters, F&M works primarily with a third-party processor

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