BSA-AML Examiner School Case Study eBook

Internal Use Only #

Unit developed a real-time BSA and OFAC risk dashboard in conjuction with this risk assessment update though the risk assessment process was completed more than 12 months after the prior assessment. Unit also improved its End User risk rating methodology and processes though risk ratings are conducted on a quarterly basis rather than more often. Unit utilizes an automated transaction monitoring software (DataSeers) which allows for broad monitoring of specific transaction and client types by bank partner. The provider's operational history is limited as is Unit's operational history with the software which was deployed in July 2022 and the efficiency of the system remains low given rapid End User growth. Unit's process for updating cusotmer files was updated but relies heavily on manual processes.

Unit has a large number of End Users with at least one open account on the platform. Higher numbers of End Users drive more risk through greater exposure to financial crime risk as well as greater resource and oversight needs.

Regular Risk Measurement; Automated transaction monitoring; Automated customer file updates

Size

High (3)

# of End Users

Weak

2

0.0600

0 - 199,999

200,000 - 499,999

Over 500,000

High

234,143

882,516

Unit also improved its End User risk rating methodology and processes though risk ratings are conducted on a quarterly basis rather than more often. Unit's transaction monitoring system is designed to handle large volumes of accounts and transactions. There is no way to distinguish the different account types and bank partners via the dashboard and reporting is manual.

The number of Unit End Users grew rapidly over the past year, largely driven by substantial growth at a few Clients.

Growth

Growth in # of End Users

High (3)

Less than 5% growth

Between 5% and 15% growth

Greater than 15% growth

High

N/A

377%

End User risk rating; Automated transaction monitoring

Moderate

2

0.0600

Customer Due Diligence and Enhanced Due Diligence fields have been added to applications. Businesses will now be required to collect additional fields which can be used during transaction monitoring.

Unit's percentage of individual End Users was 67% of all End Users. Businesses and sole proprietorships have larger per transaction sizes and greater complexity leading to higher BSA risk.

Moderate (2)

Individual vs. business (incl. sole prop)

Moderate

1.9

0.0380

More than 75% individual End Users Between 50-75% individual End Users

Less than 50% individual End Users

Moderate

93%

67%

CDD/EDD Application Updates

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 not US citizens and the accounts are classified as non-resident accounts, or NRAs. Foreign documents increase difficulties in identifying the customer, source of funds, and source of wealth.

Non-US nationals are subject to enhanced due diligence and must provide information on source of funds, annual income and occupation. Documents are verified via selfies for most non-US resident customers.

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

Selfies implemented; EDD implemented; Geo-location for most non-US national accounts

High (3)

Less than 10%

Between 10% and 30 %

More than 30%

High

2%

38%

Moderate

1.9

0.0570

Type

Unit uses Alloy and their vendors to conduct KYC/KYB verification. There are additional workflow tags that can be created or turned on to check for active status for the business as well as business address. However, Unit uses a minimal KYB flow and relies on the manual review team to look at websites and PII flags to determine business legitimacy.

Unit's has a high percentage of business accounts with foreign beneficial owners. Foreign beneficial owners present higher risk for customer identification and heightened concerns about domestic shell companies.

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

High (3)

Alloy KYC/KYB Assessments and Website Review

Less than 10%

Between 10% and 30 %

More than 30%

High

93%

96%

Weak

1.9

0.0570

Unit's total number of active users is slightly more than 163,000 and grew by more than 800% over the last year. Active users are classified as having had a transaction over $10 in value in the last 30 days. Growth in active end users leads to an increase in the volume of transactions and the value of transaction processed.

Unit's transaction monitoring system is equipped to handle a large volume of transactions and accounts. However, the program is currently inefficient and needs tuning to be effective

Moderate (2)

# of active users

Moderate

1.9

0.0380

Transaction monitoring system

less than 100,000 customers

100,000 -200,000 customers

200,000 or higher customers

Moderate

16,926

163,171

Level of Activity

The number of Unit inactive customers grew by more than 200% over the last year. Inactive accounts include those frozen for fraudulent activity, though this is only a small percentage of the total this is the primary driver of risk in this category. The vast majority of inactive accounts have no activity probably because End Users utilize other financial services and/or utilize financial services through Unit on an irregular or periodic basis; we do not believe that this second category is a large driver of risk.

Procedures on account actioning are emerging and not tested. No tracking of accounts placed in frozen status. No audit log of who has frozen or reason for freeze. No controls over Client ability to unfreeze an account or create a new account for a customer with a frozen account

Audit log of account actioning and restrictions on ability to complete actioning

# of inactive users

High (3)

less than 100,000 customers

100,000 -200,000 customers

200,000 or higher customers

High

217,217

719,345

Weak

1.9

0.0570

Unit's average Socure Score is 0.546. Socure examines the consistency of elements contained in the application.

Socure Fraud Scores have remained consistent. Unit has the ability to update the fraud scores to trigger additional documentation if needed.

Socure fraud scores

Low (1)

Average Socure score is less than .5

Average Socure score is .5-.7

Average Socure score is above .7

Moderate

0.546

0.546

Ability to change threshold settings

Strong

1.9

0.0190

ID Analytics scores have decreased due to the deployment of several new internal flags created by the Fraud Operations Team. The PII Flag has helped to decrease the number of users who were able to open multiple accounts on the platform.

Unit's average ID analytics is 536. ID Analytics examines an end user's application data versus the consistency in the information provided. New flags, workflows, and auto denials have lowered this score

Average ID Analytics score is less than 500

ID analytics fraud score

Low (1)

Average ID Analytics score is 500-700 Average ID Analytics score is above 700

Moderate

540

536

Strong

1.9

0.0190

Ability to change threshold settings

Risk Level

Unit's customer risk rating is manual and performed quarterly. Risk rating is not used to its full potential and could be used for transaction monitoring improvements and rule analysis.

Unit has several clients who offer accounts to non-US nationals which increases the overall percentage of high risk customers

Automate and integrate customer risk rating at account opening

Moderate (2)

individual customer risk rating

Weak

1.9

0.0380

0-1% of customers are high risk

2-10% of customers are high risk

11-100% of customers are high risk

Moderate

Unknown

3%

Unit averages about 1 PEP per year. A higher rate of End users classified as PEPs requires more customer due diligence. Targeted demographic for clients could change this in the future

PEP tracking is manual and is used only for periodic reviews at this time. There is no way to "tag" a customer as a PEP on the Unit platform

# of PEPs

Moderate (2)

No PEEPs on the Unit platform

1-3 PEPs on the Unit Platform More than 3 PEPs on the Unit platform Moderate

1

2

Automate PEP tracking

Weak

1.9

0.0380

Unit's rate of manual documentary review sits at 40%. A higher rate of increase in Documentary review requires manual labor and elevates the risk of human error posed to the BSA Program.

The rate of non-documentary reviews has increased significantly. However, these reviews are completed by individuals with little to no CIP background.

ratio of documentary vs. non documentary reviews

Less than 50% of applications require a documentary review

50-75% of applications require a documentary review

75-100% of application require a documentary review

CIP Validation process

Low (1)

Low

8%

40%

Improve CIP process for non-documentary reviews

Weak

1.9

0.0190