BSA/AML Examiner School Case Study

Internal Use Only

• Disbursement of loan proceeds by multiple bank checks, particularly if the checks are payable to the customer but under $10,000. These checks may be used later to avoid CTR reporting requirements. • A request to wire loan proceeds for no apparent legitimate purpose or to a location outside the U.S. • A customer brings cash for the down payment on a real estate loan to the closing. X. Customer Identification Program Policy and Procedures The USA PATRIOT Act requires all banks to have a customer identification program (CIP) in place. All Bank employees that open new account relationships must understand all of the CIP requirements. The CIP rules require you obtain specific minimum information from new customers. The information must be verified to form a reasonable belief that the customer identity is known. The information may be verified using documents presented, this entails using a valid driver's license or passport. A non documentary verification may be used; this would be an independent means to confirm the customer information provided. The required information must be obtained from all new customers as well as all new accounts, this includes loans. Lenders must obtain identification documentation at loan closing from all borrowers. At minimum, the following must be obtained and verified: • Identifying information about a customer (i.e., Name, for individuals-date of birth, Physical address, and Identification Number such as TIN-SSN.) • A description of the documentary methods that the Bank used to identify the customer. (i.e., copy of Driver's license, State issued Identification Card, Passport, or any other document that has the customer's picture). • A description of the non-documentary methods and results of any measures that the Bank took to verify the identity of the customer. One method to verify this information is through a third-party vendor or credit reports agencies. Reverse directories may be used as well to verify addresses and send thank-you letters to customers. If it is believed that the customer is providing false information, the incident must be reported to the BSA officer or immediate supervisor for further action. This may include filing a suspicious activity report (SAR). In addition, the USA PATRIOT Act amended the BSA to require special due diligence for private banking accounts for non-U.S. persons, including those held for politically exposed persons (PEPs) or senior foreign political figures. Note: Employees, including Bank Officers, may not make an exception to CIP procedures for a new customer because the person is personally known by any Bank employee, officer, director, or shareholder. Any request by an officer or employee to waive these procedures should be reported to the BSA officer. Please be sure to reference the Bank's CIP Policy or Procedure. Please see CEP Matrix as an additional reference. Definitions • Account: An "account' is defined as deposit account, loans account, safe deposit box, cash management, custodian, or trust account.

For Training Purposes Only

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