BSA/AML Examiner School Case Study

Internal Use Only

appear on any suspicious monitoring reports or monitoring systems throughout the term of their relations with the Bank. However, in order to be in compliance with BSA regulations, the Bank must be able to identify all high risk customers and also identify those high risk customers that require extra attention due to unusual activity resulting in red flags to the BSA Department. The BSA Department should utilize a grading system to identify high risk customers. Identifying and Classifying Existing Accounts as High Risk accounts The BSA Department should continuously be monitoring those customers classified as high risk, as well as those customers (consumer or commercial) not classified as high risk but have appeared in BSA monitoring reports or BSA monitoring systems. High risk customers should be monitored based on the totality of the circumstances, not just based on the line of business. Although the line of business the customer is involved may dictate the classification of "high risk", there will be other factors considered by the BSA Department to determine if a customer or business needs enhanced scrutiny. Individual Selection of High Risk Customers • 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 • The BSA Department should utilize a combination of monitoring processes and system reports (i.e., wire transfer reports, large cash transaction reports, Anti-money laundering software, etc.) daily, monthly and quarterly to identify the risk element of each customer and identify suspicious activity. • During account creation, the account officer should make reasonable efforts to inquire and identify what type of account or activity the customer will maintain at the Bank to identify a high risk customer or entity. Customer due diligence applies to all customers that are seeking to open an account with AJ&R Bank. Questions for All Customers (consumers or entities) 1. What is the purpose of the account? 2. Customer's (or beneficial owners') occupation or type of business must be documented. 3. What is your occupation? Are you currently employed? Place of employment? (Note: Be sure to obtain and record the occupation of each account holder.) If the customer is unemployed at the time of account opening, customer must provide their previous employer. 4. What type of items do you expect to be deposited to the account (i.e., cash, check, direct deposit, wires, ACH transactions, etc.)? How frequently will deposits be made? Estimate of anticipated account activity; especially cash activity and wires? 5. What methods do you plan to use to remove funds from the account (checks, ATM, debit card, automated bill payment, etc.)? 6. Will transactions affecting this account originate or have a destination outside the US? 7. What is the source of the funds/assets being deposited or used to open the account? 8. Why did you choose this bank? What other banks do you have accounts with? 9. If business, where is the business organized? Also obtain the county and state registration of business and date of resolution and registration; proof of legal status of the business; if the entity uses fictitious names, obtain documentation containing the customers' real names and other identifying information.

For Training Purposes Only

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