BSA/AML Examiner School - Case Study Oct 2023

screens with as much information as possible in case it is needed to classify the customer as high risk later over the life of the account. 3. Evaluate the nature of the relationship. For example, determining the length of a customer's relationship with the Bank, the products and services provided to a customer and the manner in which a customer was referred to the Bank. The nature of a customer's relationship may serve to mitigate or to increase the overall risk indicators described below. 4. During account creation the account officer is required to ask several questions to identify if the customer should be classified as high risk based on the High Risk listing provided by our regulators. Customer Due Diligence (CDD) is best described as obtaining information at account opening and during the life of the account that helps our bank in identifying potential high risk customers. Once those customers are identified, they become subject to enhanced due diligence (EDD). Enhanced Due Diligence- High Risk Customers • Enhanced customer due diligence is used when a customer presents an element of risk that requires additional documentation and additional monitoring over and above that necessitated in routine customer relationship. • If you have identified a High Risk Customer (refer to the listing of high risk customer/entitles) during account opening, you should consider obtaining the following information as part of the Enhanced Due Diligence . Please refer to attachment for list of items required on High Risk Customer. Exhibit A • It is likely that you know this information about the existing and potential customers already. The challenge is to make sure it is documented in a paper or electronic file, particularly for those customers that meet the regulators' definition of high risk. Monitoring High Risk Customers for Unusual Account Activity High risk customer and their transactions should be reviewed more closely at account opening and more frequently through the term of their relations with the bank. Please see below for a list of items the account officer will be responsible for when the BSA Officer contacts them for additional enhanced due diligence after the account has been opened and it has been appearing in our BSA suspicious monitoring system and reports: • The BSA Department will ensure the account officer followed the required account opening procedures. • The account officer must provide the BSA Officer proper documentation (memorandum) of all discussions with customer regarding their explanation for unusual activity, explanation for changes in account activity, any recent changes in the business practices and anticipated account activity. Reasons for funds transfer (incoming or outgoing) state whether or not the fund transfers are in-line with normal business activity of customer. • Based on review, the BSA Officer and Senior Management will determine whether an account should be closed, additional monitoring is required, or if a SAR must be completed. • The BSA Department should maintain a Master list of High Risk Customers that is reviewed periodically. The Master List should include high risk and regular customers, businesses, exempt customers, foreign customers or any other type of customers requiring additional monitoring for unusual account activity or that may engage in frequent cash transaction (deposit or withdrawals), frequent wire transfers or frequent ACH transactions

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