BSA-AML Examiner School Case Study eBook

Internal Use Only #

End users with a relationship greater than 12 months is a reduced risk to the BSA program as the program is able to use more data to determine whether the activity is expected/unusual

While the customer may be a customer for a prolonged amount of time Unit has no way to identify changes to the account and the date at which the change occured.

50% or more of relationships are >12 months

Relationship

High (3)

Length of relationship

25-50% of relationship are >12 months 0-25% of relationships are >12 months

High

0%

16%

Audit log of account changes

Weak

2

0.0600

Geography

20%

Our manual review team is scanning applicants for US residency. If the applicant provides an address outside of the US the application will be denied. However, these are not always caught due to human error. Our KYC vendors are able to "tag" applicants who enter an address that correlates to a HIDTA/HIFCA region. However, this tag is only assigned during the onboarding phase. If the customer updates their address at anytime the tag will not generate. Our transaction monitoring system has specific rules designed to pick up on high volumes of international usage. Our transaction monitoring system will alert us for international usage on an account. However, it is not able to alert us for specific thresholds of activity (domestic vs. international) per account Our transaction monitoring program is equipped to handle large volumes of growth. However, these increases can lead to skewed reporting and missed reports

Unit does not open accounts for customers based outside the US.

% of customers with non-US address

Low (1)

Less than 10%

Between 10% and 25%

More than 25%

Low

0%

0%

Automated application failure

Weak

5%

0.0500

% customers located in High Intensity Drug Trafficking Area (HIDTA) or High Intensity Financial Crime Area (HIFCA)

Less than 1% of Unit customers are located in a HIDTA/HIFCA region. HIDTA/HIFCA regions present higher risk for drug trafficking and financial crime. Unit has a high percentage of business customers with beneficial officers located outside of the US. Beneficial owners with a non-US address present higher risk for domestic shell companies. Unit has less than 1% of transactions (by value) with an international nexus.

Customers

Low (1)

Less than 25%

Between 25% and 50%

More than 50%

Low

0%

<1%

KYC vendor

Moderate

5%

0.0500

% of business customers with beneficial owners with a non-US address

High (3)

Less than 10%

Between 10% and 30%

More than 30%

High

81%

86%

Transaction Monitoring

Moderate

5%

0.1500

Transactions

% international transactions, by value

Low (1)

0-10%

Between 10% and 25%

More than 25%

Low

<1%

1%

Transaction Monitoring

Moderate

5%

0.0500

Products & Services

20%

Unit's transaction growth continues to increase as we onboard new clients and launch bank partners

High (3)

Growth in total transactions, by count

Weak

5%

0.1500

Less than 10%

Between 10% and 50%

More than 50%

High

13233.33%

988.16%

Transaction Monitoring

Offerings

Unit's cash deposit limits are below regulatory requirements. Unit has implemented several transaction monitoring rules to monitor cash specifically and to alert on regulatory reporting thresholds.

Cash transactions are higher risk because the source of funds is harder to determine and cash has additional regulatory requirements from a reporting standpoint.

Low (1)

% of total transactions in cash

Strong

5%

0.0500

Less than 10%

Between 10% and 25%

More than 25%

TBD

<1%

3.08%

Transaction limits

Unit's dispute rate has dropped significantly due to requirements around plaid integration and the addition of additional staffing for payment review

Current controls in place have improved dispute rates, we will continue to montior and assess next quarter.

Disputes

Moderate (2)

0-0.3%

0.3-.5%

higher than 0.5%

Moderate

0.57%

0.04%

Monitoring

Moderate

2.5% 0.0500

Unit continues to receive hold harmless letters; primarily for business accounts.

Moderate (2)

Hold Harmless Letters, per 100K

N/A

N/A

NA

2.5% 0.0500

Less than 10

Between 10 and 25

More than 25

Moderate

27.71

14.12

Returned ACH rates dropped within NACHA guidelines due to the enforcement of secondary verification requirements

Current controls in place have improved dispute rates, we will continue to montior and assess next quarter.

Risk

% of Returned ACH

Moderate (2)

0

Less than .10%

Between .10% and 1.00%

More than 1.00 percent

Moderate

1.30%

0.10%

Monitoring

Moderate

2.5% 0.0500

# of customers with >50 deposit accounts

Unit has several customers who have multiple deposit accounts.

Clients are able to open additional deposit accounts under a customer ID without Unit approval.

High (3)

0-10

10-15

more than 15 customers

High

18

634

Restrictions on dashboard abilities

Weak

2.5% 0.0750

BSA Operations

5%

Exploring options to outsource tasks (FTC) associated to increased growth of end users and increased training for FTEs. This includes developing a triage system for incoming alerts, tasks, etc. There is no anticpated turnover within the BSA team. There is open communication regarding work statisfaction, career growth, and even distribution of workload

Unit's staffing has increased; however, it is still not enough to continue a positive trend for FTE per active end user.

BSA FTE per 10,000 active end user

High (3)

More than 1.5

Between 0.5 and 1.5

Less than 0.5

High

1.77

0.31

Increase Staff & Prioritization

Weak

2.5% 0.0750

Staffing

Unit's BSA team did not encounter any turn over between the review periods

Low (1)

Annual turnover rate

Strong

2.5% 0.0250

Less than 33%

Between 33% and 66%

Greater than 66%

Low

0

0

Work Statisfaction

BSA Risk

HIGH

100% 2.2150

OFAC

A higher number of OFAC incidents for blocking or freezing increases risk as each block/freeze action requires regulatory reporting and asset freezes require ongoing monitoring and reporting.

Operating History

Confirmed OFAC incidents, past year

Low (1)

0

1

More than 1

Low

0

0

N/A

N/A

NA

25% 0.2500

Unit only offers account to customers based in the United States though it does allow for non-resident accounts and non-US nationals. Many Unit clients have enabled geolocation services for address verification to ensure that non-US nationals are located in the United States. Unit conducts screening of all individual End Users at onbaording using Socure third party services and ongoing for as long as the customer maintains an account also using Socure third party services. Unit only offers accounts to US-incorporated business customers though it does allow for foreign officers and owners including those based outside of the United States including coutnries subject to OFAC sanctions. Unit does not process outgoing international wire transfers or international ACH (IAT). Incoming wire transfers originating in a foreign country are allowed with screening conducted by a combination of bank partners where Unit does not have direct Fed access or Unit does not assess the location of vendors during integration. We've requested the additional integration of BSA review for product vendors to ensure compliance Unit conducts screening of all entities at onboarding

Unit's percentage of individual End Users that are non US nationals was 38%. Non-US nationals increase the risk profile due to the likelihood that these customers are in a country that is the target of OFAC sanctions.

% of individual End Users that are not US-nationals (non-resident accounts)

US-based account restrictions; Onboarding screening; Ongoing screening

High (3)

Less than 10%

Between 10% and 30 %

More than 30%

High

2%

38%

Moderate

13% 0.3750

Customers

Unit's has a high percentage of business accounts with foreign beneficial owners. Foreign beneficial owners present higher risk due to the likelihood that these customers are in a country that is the target of OFAC sanctions. A higher percentage of international wires increases risk due to the possibility that the foreign country is a target of OFAC sanctions.

% of Business End Users with at least 1 non-US beneficial owner (i.e. foreign beneficial owner)

US-based account restrictions; Onboarding screening; Ongoing screening

High (3)

Less than 10%

Between 10% and 30 %

More than 30%

High

93%

96%

Moderate

13% 0.3750

Transactions

International wires as a % of total wires

High (3)

Less than 10%

Between 10% and 20%

More than 20%

N/A

Not available

Not available

Restrictions on international transactions

High

25% 0.2500

Unit does not assess the location of vendors during integration

Vendors

vendor location

Low (1)

0-25% of vendors are international

25-50% of vendors are international

50-100% of vendors are international

Low

<25%

<25%

BSA Team Review of Product

Weak

13% 0.2500

Unit has 35% of its workforce outside of the US. Employees outside the US increase risk as they may be subject to

Employees

employee location

Moderate (2)

Less than 10%

Between 10% and 90%

More than 90%

Moderate

Unknown

35%

N/A

N/A

N/A

13% 0.2500

OFAC Risk

MODERATE

100% 1.7500