2020 Journal of Community Bank Studies

THIRD PLACE: Mansfield University of Pennsylvania

total. Considering all of C&N’s other expenses, this constitutes a significant percentage the bank must account for every year. A 2019 study of 143 participating financial institutions revealed that the cost of AML compliance as a percentage of total assets was up to 0.08% for firms with more than $10 billion in assets and up to 0.85% for firms with less than $10 billion in assets (“LexisNexis”). Even though large banks have larger compliance expenditures, the costs affect smaller banks more extremely when compared to the bottom line. Changes and Challenges Due to advancements in technology, mobile threats are becoming more of a threat. Fraudsters may take advantage of amenities such as online check deposits, and C&N must handle all fraudulent cases that may occur as a result. Since it is a smaller bank, these fraud cases fall under its BSA department for further investigation. It is critical that C&N adapts to these new changes with the services it offers. As mentioned in the executive summary, the Patriot Act was the biggest change in BSA regulations and affected many of C&N’s previous compliance processes. This bill introduced a plethora of new regulations, including the Customer Identification Program (CIP), which prescribes “the minimum standards for financial institutions and their customers regarding the identity of the customer that shall apply in connection with the opening of an account at a financial institution” (“Five Things”).

Due to advancements in technology, mobile threats are becoming more of a threat.

For individual accounts, the customer must provide name, date of birth, address, and some form of identification. C&N must also calculate the risk of a customer and assign a risk rating. Each bank has a different process when calculating this risk; it depends on many factors, including the geographic location of the bank, its customer base, what kinds of accounts it offers, and the methods of opening the accounts. The CIP is part of the Know Your Customer (KYC) process, which all banks undergo to ensure safety and defend against financial crimes. In addition to the regulations from the Patriot Act, C&N must also follow the rules of the 2018 customer due diligence rule, another component of the KYC regulations. This rule has many of the same components required for the CIP, but with additional requirements. To comply with CDD, C&N monitors customer accounts and reports suspicious transactions to detect anomalous behavior. Banks may ask to verify information by asking customers to

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