2020 Journal of Community Bank Studies

2020 COMMUNITY BANK CASE STUDY COMPETITION

files anywhere between 1000 to 1200 of these reports yearly and could save on these expenses if the threshold were to increase. Filling out reports is extremely time-consuming, and many of the reports filed do not result in any law enforcement action. The threshold for filing suspicious activity reports is also outdated. In 1992, Congress passed the Annunzio-Wylie Anti-Money Laundering Act, which required all institutions to fill out SARs. After adjusting for inflation, $5,000 then would be closer to $10,000 (“CPI Calculator”). The consensus in the banking industry is that these regulations put a strain on regular business operations. However, it is necessary to abide by the policies, and C&N acts in accordance with the rules and meets every compliance regulation to ensure customer safety. John Reber, EVP and Director of Risk Management at C&N, states that “Part of the [goal of] modernization is bumping the threshold $5,000 to $10,000.” In this sense, any progress that can be made toward updating and streamlining the BSA/AML compliance process is significant. Banks also face costly repercussions if they violate BSA regulations. Former U.S. Deputy Attorney General Paul McNulty once said, “If you think compliance is expensive, try non-compliance” (Orunkhanov). FinCEN may administer multimillion-dollar penalties if institutions fail to comply to regulations. According to Deloitte, AML and sanctions- related regulatory actions in 2014 issued $2.35

The consensus in the banking industry is that these regulations put a strain on regular business operations.

provide financial statements, sources of funds, and a description of business operations. Due to the added regulations with CDD, C&N must devote more time to BSA/AML compliance than it did before the regulation enactment. Gathering information to comply with CDD (including seeking out primary business owners and their ownership percentages) is a very time consuming and resource-heavy process that often takes away from other important duties. Another issue that community banks face is the fact that the dollar amount thresholds have not changed since the original passage of the Bank Safety Act. For example, the requirement to submit a CTR if someone deposits more than $10,000 passed in 1970. These numbers do not count for inflation since $10,000 in 1970 is now around $65,000 in 2020 (“CPI Calculator”). C&N

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