BSA/AML Student Exercises Dec. 2022

Please see below for a list of items the account officer will be responsible for when the BSA Officer contacts them for additional enhanced due diligence after the account has been opened and it has been appearing in our BSA suspicious monitoring system and reports: • The BSA Department will ensure the account officer followed the required account opening procedures as defined in the Bank's Customer Identification, Customer Due Diligence and Enhanced Due Diligence. • The account officer must provide the BSA Officer proper documentation (memorandum) of all discussions with customer regarding their explanation for unusual activity, explanation for changes in account activity, any recent changes in the business practices and anticipated account activity. Reasons for funds transfer (incoming or outgoing) state whether or not the fund transfers are in-line with normal business activity of customer. • Based on review, the BSA Officer and Senior Management will determine whether an account should be closed, additional monitoring is required, or if a SAR must be completed. Note: Please keep in mind that not all customers in the High Risk Listing which are classified as high risk will have the same degree of scrutiny or monitoring procedures. Some high risk customers may not 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.

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