Introductory BSA/AML Examiner School, Atlanta, CA

Bank of Smithville USA

Page 4

the ATM. POATM activity should be isolated in order to establish an effective monitoring process. Additionally, the review of high-risk customers should occur more frequently than the current annual review process. These customers represent elevated risk that should be quantified and monitored on a more frequent basis. Management’s Response: CFO Grant Moore stated that all customers with POATM activity will be required to isolate these transactions in separate accounts by September 30, 20XX. BSA Officer Marks committed to adjusting the review of high-risk customers to a semi-annual proces s. • Matters Requiring Board Attention #09-20XX.04 – Perform a formal, independent staffing assessment of the BSA Department to ensure that adequate resources are provided. Required Action: Management should conduct a formal, independent staffing assessment of the BSA department, which should provide the basis for ensuring that sufficient personnel are devoted to the BSA/AML function. Supporting Comments: Permanent BSA department staffing levels have not maintained pace with the bank’s asset growth and risk profile, resulting in many of the current program deficiencies. Staffing additions do not appear to have been timely, resulting in the backlog of reviews and other internal control issues. Management should ensure that the department is adequately staffed to perform the assigned functions in a comprehensive and timely manner. Management’s Response: CFO Moore disagreed with the lack of timeliness of BSA department staffing; however, he stated that a comprehensive assessment of BSA staffing will be conducted prior to year-end 20XX. SUPERVISORY RECOMMENDATIONS 2 The following are items necessary to improve the risk management function and can be addressed by management in the normal course of business. These items will be tracked by examiners until resolved. • Supervisory Recommendation #09-20XX.05 – Specialized BSA training should be developed for specific functional areas.