BSA/AML Examiner School - Case Study Oct 2023

April 2015 — Revised as of 07-17-15

The Audit Committee of the Board of Directors AJ&R Bank & Trust Scope of Interim BSA Review

An interim BSA review of AJ&R Bank & Trust was conducted by Better Bank Corporation (BBC) as of April 28, 2015 to determine if the Bank and management had satisfactorily addressed the BSA concerns noted in prior regulatory examinations and BBC's September 2014 Independent Test. These concerns included the need for proper training and authorities for the current BSA Officer; inadequate verification and documentation of CIP information at account opening; completion errors and untimely filing of CTRs, SARs, and DOEPs to FinCEN; untimely searches for 314(a) information sharing requests; inadequate wire transfer recordkeeping and apparent violations of the "Travel Rule"; the need for a review and update of the Bank's BSA/AML/CIP policies and procedures; the need to enhance data used to determine the Bank's risk in the BSA/AML risk assessment; inadequate reporting to the Board of Directors and documentation in the minutes; and the need for written customer due diligence policy and procedures, training documentation, and communication of BSA/AML issues between management and BSA staff. In addition to discussions with management and staff, the following procedures were performed: • Reviewed BSA/AML Policies; • BSA Officer training; • Reviewed the accuracy of CTRs; • Sampled wire transfers to determine the accuracy of forms and collection of required information; • Sampled new accounts (DDA, Savings, CD, Loans) for CIP requirements; • Reviewed filed Suspicious Activity Reports (SARs) for required content; • Reviewed DOEPs for corrections and required content; • Reviewed Board of Directors meeting minutes for documentation of BSA/AML reporting; and • Reviewed 314(a) searches for timeliness and verification. The sample period for this review was September 2014 through April 2015. Executive Summary The results of this interim review indicate that AJ&R Bank & Trust’s BSA program continues to need improvement. Although some improvement regarding the completion of day-to-day tasks was noted, of primary concern are the apparent continuing deficits regarding communication by management to the BSA Officer, and the BSA Officer's authority to oversee the program. For example, it does not appear that the findings from BSC's September 2014 Independent Test were acted upon until shortly before this follow up review commenced. The BSA Officer Julie Collins did not appear to have knowledge of the FDIC's BSA Consent Order, nor had she made any presentations regarding the Program to the Board of Directors.

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