BSA-AML Examiner School Case Study eBook

To: BSA EXAMINER FROM: EIC To BSA Examiner – In order to save time here is an overview/bullet point of the BSA independent test: Independent Test: • Compliance • Mitchell, South Dakota • Date 5/10/2023 • Transactions from 2/1/2022-3/31/2023 • All discussions were held with BSA Officer Dewitt • Program is written and approved by the Board 2/2023 • Program and RA were updated at least annually and approved by the Board • The bank designated Dewitt as the BSO • Training is conducted at least annually for all employees including the Board • RA has an overall LOW risk rating • CDD (Customer Due Diligence) – observation – high risk customers are reviewed in January (however high risk list states quarterly) – sampled 9 customers with no exceptions noted • CIP – The bank does not have written procedures covering the reliance of a third party for CIP – Tracking report to resolve discrepancies within 30 days after account opening • Management should consider enhancing procedures to include 3 rd party reliance • BOI (Beneficial Ownership Information)- 11 accounts sampled no exceptions noted • CTRs (Currency Transaction Reports)-15 Reports reviewed – no exceptions noted (an improvement to prior report) • DOEP (Designation of Exempt Persons)- 10 Phase I exemptions and 3 Phase II exemptions – no exceptions noted (an improvement from the prior report) • SAR-9 SARs – with 2 exceptions noted. (Victim listed in the SAR and one did not include LE contact) • SARs non-filed- 5 reviewed (two should have been filed – 2 VIOLATIONS – FOLLOW UP (BSA Committee stated they will file) • MI- limited number sold – 3 reviewed (no exceptions noted) Sales not permitted for noncustomers. - management should consider updating the form to avoid confusion • Wire- 12 sampled all information is collected and maintained • 314(a) – no exceptions noted • 314(b) – does not participate – recommend they should • OFAC- 15 reviewed – 2 exceptions (at the time of account opening) it was done by a new representative. EIC NOTES: Independent Test – BaaS Program There has not been an independent test of the BaaS program as the last independent test was prior to onboarding a client. BSO Rose stated the bank is shopping for a firm for the 2024 independent test, keeping in mind the expertise needed for review of BSA AML on the Baas program. Klaros’s October 12, 2022, Readiness Assessment – Risk Compliance Report states we believe that the Bank’s entry into BaaS will make it appropriate to increase the frequency of these audits to no less than annually. The audit for 2024 has not been scheduled .

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