2020 Journal of Community Bank Studies

2020 COMMUNITY BANK CASE STUDY COMPETITION

than its peer group through its productive loan portfolio. Further, strategic asset allocation drives its portfolio’s value, and management seeks additional exposure by expanding its agricultural loan base. F&M Bank has historically exercised a values-driven credit philosophy (Strischek); however, recently they have created policy to bank hemp farmers, which is legal under the 2018 Farm Bill legislation. In Section 2 , we find that although anti-money laundering policies are tedious for F&M Bank’s three-person BSA/AML team, they are useful in combating most instances of fraud. In Section 3, we discover that F&M Bank’s YellowHammer software, while not the latest software available, cost-effectively serves its needs. To reduce BSA compliance costs, they dictate when and which employees to send to BSA school. Additionally, the BSA/AML staff collaborates with local banks to discuss practical, cost-saving strategies. In Section 4, we recommend the recent Illicit Cash Act legislation. This legislation would

transfer beneficial ownership liability away from F&M Bank, as well as update provisions of the BSA. In addition, the Act’s allowance for experimentation with newer and more affordable software could lead to cheaper and more accessible BSA software for smaller financial institutions. The Bank Secrecy Act legislation is crucial for safeguarding our financial system. In an increasingly digital world, the threat of fraudsters to financial institutions is ever-present. This is especially important to study in community banks as they make up 92% of banks in the U.S. (Wooten). Alleviating the burdens that the BSA causes community banks has the potential to vastly increase the efficiency of the American financial system. This case study explores the methods and legislation available to minimize the cost of BSA compliance and streamline communication channels to foster an environment of shared resources.

1. 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).

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