BSA/AML Student Exercises Dec. 2022

• The deposit or withdrawal from a covered person's account of multiple monetary instruments just below the reporting threshold on or around the same day, particularly if the instruments are sequentially numbered. • High-value deposits or withdrawals, particularly irregular ones, not commensurate with the type of account or what is known and documented regarding the legitimate wealth or business of the covered person. • A pattern that shortly after a deposit or wire transfer is received by a covered person's account, the funds are wired in the same amount to another financial institution, especially if the transfer is to an account at an offshore financial institution or one in a secrecy jurisdiction. • The frequent minimal balance or zeroing out of an account of a covered person for purposes other than maximizing the value of the funds held in the account (e.g., by placing the funds in an overnight investment and having the funds then return to the account). • An inquiry by or on behalf of a covered person regarding exceptions to the reporting requirements of the Bank Secrecy Act (i.e., CTRs and SARs) or other rules requiring the reporting of suspicious transactions. Red Flags for Lenders Following are some red flags that may alert you to fraudulent or suspicious activity by loan customers. While not always suspicious by themselves, you should alert your supervisor or the BSA officer so an investigation can be completed. • A customer who does not live or work in the Bank's trade area but applies for a loan with no apparent reason. • A customer who suddenly brings a seriously delinquent loan current with unexplained cash payments. • A customer who applies for a loan secured by a large certificate of deposit that was purchased in the past 12 months. • A customer who refuses to give you a reasonable purpose for a loan. • A loan purpose that does not seem commensurate with the customers financial information. • Information provided on a loan application that cannot be verified or is found to be false (This situation should be reported immediately and will likely result in a Suspicious Activity Report being filed by the BSA officer.) • 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:

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