2020 Journal of Community Bank Studies

THIRD PLACE: Mansfield University of Pennsylvania

As regulations continue to develop and become more complicated, banks find they are dedicating more hours to screening, which adds to overall labor costs. A 2019 study of Canadian and American financial firms revealed that firms with less than $10 billion in assets screened an average of 255 names per day (“LexisNexis”). Even though more banks are moving toward incorporating machine learning into their software, having officers go in manually will always be crucial to the process. The final line of defense that C&N uses is internal auditing, which conducts independent evaluations of the risk management program. This includes reviewing the policies, activities, internal controls, and organizational structure relating to BSA compliance. The Federal Financial Institutions Examination Council (FFIEC) states, “The audit should be risk-based and evaluate the quality of risk management for all banking operations, departments, and subsidiaries” (Cannon). However, there is no standard auditing procedure; each tailors its procedures to fit the institution’s needs. Factors that are considered when evaluating the quality of risk management are geographic location, transactions, customers, services, and products. Dedicated Employees C&N trains all its employees in risk assessment and BSA/AML compliance. However, there are two employees who are specifically responsible for maintaining the BSA department, along with the executive who serves as the BSA officer. This is lower than the average of banks that possess $1 billion to $9 billion in assets, which is

four full-time employees (Alter). However, since C&N lies at $1.2 billion in assets, it aligns with the statistic. These two full-time BSA employees at C&N work through the software alerts, which can range from 500 to 600 alerts per month, and also monitor accounts for unexpected behavior. They assess if the alerts are potentially suspicious or unexpected for the type of account and customer. If the BSA staff believes something is suspicious, they will do further research and move it to a separate case that will be researched with more detail. They analyze and research these cases more thoroughly, which takes much more time and resources. Officers may have to file a Suspicious Activity Report (SAR), when necessary. SARs are extremely important; the officers regularly use them when law enforcement goes to initiate financial investigations and other criminal cases. Transactions of $5,000 or

C&N trains all its employees in risk assessment and BSA/ AML compliance.

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