2020 Journal of Community Bank Studies

SECOND PLACE: James Madison University

(Teng). Defensive SARs are common because defensive reports lessen the possibility of misreporting and being challenged by regulators (Teng). Regulators are continuously working to reduce the number of Defensive SARs, to ensure reports are purposeful. The Financial Conduct Authority, a major regulator in the United Kingdom, has already made changes to AML procedures to reduce SAR volume so banks can look at the “bigger picture” rather than the individual transactions which often flood the system (“ Anti-Money Laundering ”). Ultimately, the Illicit Cash Act streamlines communication between financial institutions and law enforcement and updates standards that have not changed since the 1970s such as the review threshold. One of the main challenges of the American financial system is identifying the purpose of large sums of foreign investment. While foreign investment can grow the economy, foreign investment in criminal activities needs to be prevented (Ariza). The Illicit Cash Act proposes that companies be required to list their owners at incorporation (United States). This would eliminate a loophole which criminals are taking advantage of for storing offshore funds. Another issue that needs revision is the discrepancy between holding large financial institutions to the same standards as community banks. An effective BSA compliance framework should include scaling based on the capital levels of financial institutions. The current reporting threshold of $10,000 is exceeded 3.5 Change Through Innovative Technologies or Collaboration

frequently at F&M Bank which suggests the threshold is even more common at larger financial firms. An increase in the reporting threshold would reduce the strain placed on financial institutions regarding BSA compliance

and transaction review. 3.6 Section Summary

After meeting with the BSA compliance team at F&M Bank, we found that the compliance team is satisfied with the current technology that they utilize for BSA compliance. However, the team at F&M feels as though the software could be improved to track common fraudulent activities such as kiting and cash structuring. F&M does not collaborate with other financial institutions in the Shenandoah Valley regarding BSA reform. However, they recognize the need for better communication between financial

Another issue that needs revision is the discrepancy between holding large financial institutions to the same standards as community banks.

35