BSA/AML Examiner School Case Study

Internal Use Only

Enhanced Due Diligence for High-Risk Customer • It is the policy of the Bank that the following enhanced due diligence standards be conducted and properly documented by Bank personnel for high risk customers that pose high money laundering or terrorist financing risk. • These enhanced due diligence standards for high risk customers are especially critical in understanding their anticipated transactions tracked by the Bank's suspicious activity/anti-money laundering monitoring system that reduces the Bank's reputation, compliance and transaction risks. • It is the responsibility of operations and lending personnel to review high risk customers and their transactions more closely at account opening and more frequently throughout the term of their relationship with the Bank in addition to risk based monitoring and tracking duties performed by the BSA Department. • In general, Bank personnel may determine that a customer poses a high risk because of the customer's business activity, ownership structure, anticipated or actual volume and types of transactions, including those transactions involving high risk jurisdictions. If so, it is the policy of the Bank to obtain the necessary information from the customer specified by our procedures both at account opening and throughout the relationship. • Operations and lending personnel are responsible for obtaining the required information in accordance with the guidelines/procedures, maintaining this information in the customer CIF and also provide this information to the BSA. • Department for monitoring procedures. In addition, it is the responsibility of operations and lending personnel to ensure account profiles are kept current for their respective area and risk profiles adjusted or suspicious activity reported when the activity is inconsistent with the profile. If the above information cannot be obtained in accordance with these standards Bank personnel are to contact the BSAIOFAC Officer for further guidance and instruction. • The Bank maintains a comprehensive due diligence program designed to mitigate the risks associated with high risk customers and is commensurate with the risk levels presented. Such accounts are designed as "high risk" by the Bank, and monitored in accordance with the various provisions of this policy. The Bank's process for monitoring accounts is provided in the Anti-Money Laundering Policy section. • Although attempts to launder money through the Bank can originate from many different sources, certain kinds of businesses, customers, transactions, or geographic locations may lend themselves more readily than others to potential criminal activity. According to bank regulators, the following types of businesses/customers could be a potential source of money laundering. These customers present an element of risk that will require additional documentation and additional monitoring over and above that necessitated in routine customer relationship. "High-Risk" Examples include: Businesses/Customers • Nonresident aliens (NRA) and accounts for foreign individuals • Private Banking Customers • Senior foreign politically exposed person (PEPs) and their immediate family members and close associates. • Embassy and foreign consulate accounts • Nontraditional financial entities (NBFI), such as: o Currency exchange houses, also known as giros or casas de cambio o Money transmitters, and check cashing facilities o Money Services Business-MSB (i.e. gas station, convenient stores, and grocery stores)

For Training Purposes Only

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