BSA/AML Student Exercises Dec. 2022

• Electronic funds payment services, such as electronic cash (i.e., stored value), funds transfers (domestic and international), ACH transactions and ATMs • Private banking (domestic and international) • Trade finance (letters of credit) • Lending activities, particularly loans secured by cash collateral and marketable securities • Non-deposit account services (i.e., non-deposit investment products, insurance, etc.) High-Risk Countries • The following countries have been identified by FINCEN (Financial Crimes Enforcement Network) and the FATF (financial Action Task Force) through advisories, warn banks and financial institutions operating in the U.S. that "enhanced scrutiny" must be given to transactions in the following jurisdictions. http://www,fincen.gov • Countries in which the production or transportation of illegal drugs may be taking place. • Bank secrecy havens such as Cayman Islands. • Emerging countries that may be seeking hard currency investments. • Countries identified in FinCEN advisories. • Major money laundering countries and jurisdictions. CIP vs. Customer Due Diligence Customer identification procedures (CIP) only provide assurance that the Bank knows the identity of its customer. It does not tell the Bank what the customer does or what sort of transactions the Bank might expect from the customer. Therefore, CIP requirements (name, address, DOB and SSN1TIN) do not provide enough useful information to establish the level or type of Anti-Money Laundering risk that customer presents. Making a valid assessment at the time of account opening and later during the life of the account requires more information. Hierarchy of CIP, CDD, and EDD at Account Opening • Enhanced due diligence (EDD) includes extraordinary questions because the person or entity has been identified as subject to expanded review procedures. Information sought is needed to more specifically predict account activity and increase the bank's comfort level with the relationship. Refer to list of high risk customers. • Customer due diligence (CDD) consists of routine questions which broadly predicts account activity, but specifically identify persons and entities subject to enhanced due diligence. • Customer Identification program (CIP) describes routine requirements for specific information which identifies the person or entity. Verification by documentary or non-documentary methods is required. Hierarchy of CDD, and EDD during the life of account • Enhanced due diligence (EDD) applies to higher risk customers and incorporates monitoring specific to that customer, i.e. transactions are analyzed via comparison to the account officers documentation for that specific customer. For customers identified as "high risk," the monitoring is routine. However, an unusual or suspicious transaction may prompt analysis of a customer not previously recognized as high risk. In either case, unusual activities that are not resolved are referred for SAR consideration. • Customer due diligence (CDD) consist of reviewing name of banks system and/or reports and customers transactions looking for activity that does not fit normal consumer or business account activity. Unusual and suspicious activity is investigated.

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