2020 Journal of Community Bank Studies

SECOND PLACE: James Madison University

De-risking is, “the practice of banks limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering” (U.S. Government Accountability Office). F&M has traditionally had to de-risk and remain selective in what kinds of businesses it provides with banking services. For example, they choose not to bank money service businesses as they are another risky category. F&M recently created policy geared towards new legislation, The Farm Bill (2018), which legalizes hemp farming. Hemp-related businesses are considered high-risk by the banking industry due to their close association with marijuana (“Industrial”). FinCEN requires specific regulations and inspections, including checking that hemp crops are less than the 0.3% THC concentration level (Rowe). F&M was one of the first banks in the area to take advantage of the development of this newly legal business. A lack of direction from FinCEN makes it difficult for F&M to know what to do in unique situations such as hemp agriculture. F&M hopes to get more clarity regarding the banking services that it can provide for these farmers. 2.5 Cost of F&M BSA Compliance F&M does not explicitly have a line item in its financial statements for the cost of BSA compliance. In our conversations with the team, they said they were not able to quantify compliance costs specifically. However, the bank’s BSA cost centers consist of the two day- to-day BSA operations’ employee salaries, the

cost of YellowHammer software, and the cost of training. This is significant as all of the bank’s branches, including its corporate office, have about 170 staff members with three of these staff members dedicated almost entirely to BSA compliance (“Annual Report”). That equates to about 1.76% of the bank’s manpower going just to complying with this legislation. All three members of the BSA compliance team were sent to BSA school, a significant expense for F&M. They continue to attend new training sessions and educate themselves as legislation changes. They utilize networking to save on costs and find out about other best practices. Along with five or six other local banks in the area, they meet with professionals from Adult Protective Services (APS) and law enforcement to talk about common types of fraud and how to combat them as efficiently as possible. This

F&M has traditionally had to de-risk and remain selective in what kinds of businesses it provides with banking services.

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