Introductory BSA/AML Examiner School, Atlanta, CA

Bank of Smithville USA

Page 3

Management’s Response: At the exit meeting, BSA Officer Marks stated that the Verafin alert backlog had been eliminated and that the backlog of cases would be resolved by the end of December 20XX. • Matters Requiring Board Attention #09-20XX.02 – Establish effective monitoring processes for activity that is outside of Verafin’s capabilities. Required Action: Management should develop processes to detect, analyze, and document unusual transactional activity that is not detected or alerted by Verafin parameters or is outside of its capabilities. Supporting Comments: Monitoring processes have not been implemented to detect suspicious activity that falls outside of Verafin alert capabilities, such as large one-sided transactions and large cash withdrawals on accounts whose alerts have been suppressed. Additionally, while processes are in place to review larger outstanding cashier’s checks, the nine month timeframe for permitting cashier’s checks to remain outstanding prior to review is excessive. Moreover, outstanding cashier’s checks for the merged institutions have not been included in the monitoring process, resulting in systemic failures to file SARs for transactions without business or apparent lawful purpose and seven failures to file SARs for activity designed to evade CTR reporting requirements. Management’s Response: During the examination, BSA Officer Marks began her analysis of cashier’s checks that had not been previously reviewed and she committed to conducting reviews of large cashier’s checks once they had been outstanding for six months or more. She stated that processes will be developed to conduct additional reviews of activity that is outside of Verafin capabilities. • Matters Requiring Board Attention #09-20XX.03 – Improve the Enhanced Due Diligence (EDD) program to implement effective monitoring of POATMs and conduct EDD reviews of high-risk customers within reasonable time frames. Required Action: Management needs to establish an effective monitoring process for those customers that process POATM activity through their deposit accounts and establish procedures that dictate an appropriate frequency for the review of high-risk customers. Supporting Comment: Sufficient processes have not been implemented to monitor numerous customers with POATMs, by ensuring that the source of cash replenishment of the ATM is identified and that an appropriate relationship exists between the ATM withdrawals and the cash utilized to replenish