Are any of you documenting the source of funds on signature cards as part of CIP? The examiners want us to start doing this!!!!

That's not CIP, it's a remnant from Know Your Customer(KYC). FDIC examiners?

Yes it was the FDIC examiners and they want us to develop procedures to identify the source of funds and document it on our sig. cards.

OCC wants same thing. We have trained on this but need to do more based on some testing results.

We document it on the CIP forms.

We just went through a BSA exam, this was never brought up.

We're FDIC.

From the FDIC's examination procedures:

12 Determine if the bank has adopted account opening and monitoring guidelines that are appropriate for the bank's size, location, products, customers, and strategic focus, including the following:

12A Verifying the customer's source of funds and type of business, as deemed necessary.

12B Determining the customer's expected transactions at or through the bank.

12C Identifying and reporting unusual transactions or activity.

Unless there are circumstances unique to a particular bank, my opinion is that A and B are only justifiable on business accounts. In addition, if it's a newly established business, bankers have pointed out to me that writing down the information you get in response to B is not helpful and may be injurious if the customer's predictions are off.

It's the original poster again...sorry for not logging in. This comment came about as a result of a BSA exam.

We are regulated by FDIC and in March 2004, during our Safety & Soundness review, FDIC also "stated" that we must document Source of Funds as part of our Know Your Customer program. So, I amended our New Account procedures (not my CIP) to state Source of Funds must be documented on the signature card. This was communicated bankwide and is verified that procedures are followed by our auditors. I was just informed that our next Safety & Soundness is scheduled for April 2005. From all the recent discussions on Banker's Threads regarding BSA Exams, I anticipate a grueling exam. I will be stocking up on over-the-counter drugs to settle my nerves, stomach and headaches!

Slim, only 1 year in between S & S exams????? Wow.

Our S&S exams are all a year apart too. They warned us when they came in that BSA was under the microscope and whey they used to be able to comment on (in passing) now has to be documented in the exam...there apparently is no "wiggle room" and that is supposedly the message coming from the top down. We have 3 pages of BSA comments, 2 violations and the rest recommendations, but EVERY one of them is going to be in the final report. I was not happy!!

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We are regulated by FDIC and in March 2004, during our Safety & Soundness review, FDIC also "stated" that we must document Source of Funds as part of our Know Your Customer program.

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And exactly what were they basing this requirement on - besides personal preference?

No matter what you say the response is that it (whatever the current topic of conversation) is necessary to find and stop terrorist financing.

Well, that's fine, but I would make that come from someone in Washington and not a field examiner. As bankers, we have to compy with the law and the regulations, but we do not have to comply with every interpretation that a field examiner dreams up. As a group, it is our duty to ask these questions of the field examiners and make them support their "requirements" with a little more than the popular rhetoric phrase of the day. These requirements will never become defined unless we hold our ground on these issues.

How else are we going to train the examiners on this thing - like all other new regulations

Well, Randy, I already got Bill Fox and John Byrne involved once last week. In speaking with other banks, it appears that there is a consistency to the method being used (at least at the OCC) so it appears to be from the top, not individual examiners.

This needs to be fought at a higher level, as is being done by banking groups and folks like Bill Fox.

Given that the OCC now has another problem bank, albeit foreign, doesn't bode well for the rest of us since examiners have been transferred for failing to find supposed suspicious transactions.

I have many many years of banking experience and am a senior manager with many years of dealing with all types of examiners and am well versed in explaining what the law and regs require and illustrating real life and real risk vs. imagined.

This is the worst I have seen. They come in with a presumption you are guilty and escalate from there.

I am having a Fed exam in the next month and all this is downright scary. It seems no matter what we do it is not going to be enough.

When you say you document the 'source of funds', are you just documenting cash vs. check or are you asking the true source of how they got there hands on the money? Many form examples merely indicate cash, check, etc. My concern is that the examiners are really looking for the true source of how they made the money.

A FRB examiner advised that we must also determine the 'source of wealth' in some cases (mainly Trust customers) for customer due diligence. This is another touchy issue with our customers. Thanks to all it helps knowing I am not alone!

Questions like are you going to be sending or receiving international wires can be addressed by tying them to a need to set up the account property and have a "wire agreement" prepared and signed. The questions can be disguised as sales and new account questions.

The OCC also wants the actual source of funds - check from attorney from sale of former residence, and so forth.

Source of wealth is also being requested so that you can determine if the person gained their wealth legitimately.

I am putting my old private banking hat back on.

Kaybee, thanks for the response. Do you believe the source of wealth is generally an issue only for international activity? We only process about 30 international wires in six months. I fully intend to obtain source of wealth, along with beneficial parties for the people/entities involved in international wires. We are in rural Tennessee and having a BSA examiner from Miami makes our reduced risk, compared from his area, a hard sell. Thanks again.

As you do a risk assessment, customers conducting international wires would be in a higher risk category. You could start documenting what your bank knows about those customers by having branch or loan officers (whatever is appropriate) document what they know about the customer's background. They may already know source of wealth. If the customer is very wealthy you may want to do some background checking via internet or other sources to make sure the story holds up. Then you also want to make sure you understand the reason for the wires and that the actual wires all tie in to that reason. The source of wealth could turn out to be important on these customers conducting international transactions. You just never know up front if it will.

At least you only have a short list!

Kaybee, thanks again for the insight. Obtaining source of wealth for international customers should not be a hard sell (even to our Officers!).