BSA/AML Examiner School - Case Study Oct 2023

From: EIC@Statebankingagency.org Sent: July 6, 2016 To: BSAexaminer@statebankingagency.org Subject: AJ&R Bank & Trust BSA examination

Thank you for helping out with this examination. Look over the prior exam comment. The prior BSA Officer Smith cleaned up the BSA program at the prior examination. There was one violation and one recommendation cited at the prior exam. I am a little concerned that the prior BSA Officer was fired of suspected theft from the institution. Julie Collins is filling in that role on a temporary basis. She is also the Compliance Officer. She is assisted by Amy Grant, who is also the Head Teller, Operations Officer, Information Technology Officer, and is helping Harry with the Human Resource Officer duties. The following will give you a little history with this institution and their BSA program. During the 2014 examination, the institution was downgraded from a “2” to a “4” and the ratings were as followed 224322/4 with an emphasis on the “4” rating for management. The deficient rating was a result of management and the deficient level of internal controls and risk management practices. Examiners found that there was inadequate staffing of positions considered critical to bank operations which resulted in the aforementioned breakdown in internal controls. Examiners also found significant non compliance with rules, regulations, and regulatory policies. At that examination, the BSA program was considered “deficient”, which represented a downgrade from “satisfactory. The reason for the down grade was due to a breakdown of internal controls and non-compliance with BSA related rules and regulations. During the 2015 examination, which was a joint exam with our federal counterparts, the condition of the institution deteriorated, yet remained a “4”. The ratings were 2-3-5-3-3-4/4. The Board and management were deemed to be critically deficient, and risk management practices were considered significantly inadequate. Management was not in compliance with provisions of the order. On the bright side, BSA was once again returned to “satisfactory”. Management has shown substantial improvement in this area, albeit it seems this area alone. At this examination, the only findings were a violation and one recommendation regarding a suspicious activity report. OFAC, as always, has been satisfactory.

For Training Purposes Only

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