Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual

Suspicious Activity Reporting — Overview

Transaction Monitoring (Manual Transaction Monitoring) A transaction monitoring system, sometimes referred to as a manual transaction monitoring system, typically targets specific types of transactions (e.g., those involving large amounts of cash, those to or from foreign geographies) and includes a manual review of various reports generated by the bank’s MIS or vendor systems in order to identify unusual activity. Examples of MIS reports include currency activity reports, funds transfer reports, monetary instrument sales reports, large item reports, significant balance change reports, ATM transaction reports, and nonsufficient funds (NSF) reports. Many MIS or vendor systems include filtering models for identification of potentially unusual activity. The process may involve review of daily reports, reports that cover a period of time (e.g., rolling 30-day reports, monthly reports), or a combination of both types of reports. The type and frequency of reviews and resulting reports used should be commensurate with the bank’s BSA/AML risk profile and appropriately cover its higher-risk products, services, customers, entities, and geographic locations. MIS or vendor system-generated reports typically use a discretionary dollar threshold. Thresholds selected by management for the production of transaction reports should enable management to detect unusual activity. Upon identification of unusual activity, assigned personnel should review CDD and other pertinent information to determine whether the activity is suspicious. Management should periodically evaluate the appropriateness of filtering criteria and thresholds used in the monitoring process. Each bank should evaluate and identify filtering criteria most appropriate for their bank. The programming of the bank’s monitoring systems should be independently reviewed for reasonable filtering criteria. Typical transaction monitoring reports are as follows. Currency activity reports. Most vendors offer reports that identify all currency activity or currency activity greater than $10,000. These reports assist bankers with filing CTRs and identifying suspicious currency activity. Most bank information service providers offer currency activity reports that can filter transactions using various parameters, for example: • Currency activity including multiple transactions greater than $10,000. • Currency activity (single and multiple transactions) below the $10,000 reporting requirement (e.g., between $7,000 and $10,000). • Currency transactions involving multiple lower dollar transactions (e.g., $3,000) that over a period of time (e.g., 15 days) aggregate to a substantial sum of money (e.g., $30,000). • Currency transactions aggregated by customer name, taxpayer identification number, or customer information file number. Such filtering reports, whether implemented through a purchased vendor software system or through requests from information service providers, significantly enhance a bank’s ability to identify and evaluate unusual currency transactions. Funds transfer records. The BSA requires banks to maintain records of funds transfer in amounts of $3,000 and above. Periodic review of this information can assist banks in identifying patterns of unusual activity. A periodic review of the funds transfer records in banks with low funds transfer activity is usually sufficient to identify unusual activity. For

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