I have an exempted non-listed retail business whom our examiners think may be integrating funds. They have observed the customer traffic at the store and don't think it justifies the cash deposits made at our bank. They are recommending the exemption be revoked. Do I need to do that or just continue to monitor for suspicious activity?

How long did they monitor the traffic at the store?
Have you done a site visit and monitored the types of items they sell and the traffic?
Do examiners go out and monitor activity in a customers place of business?

You actually have examiners that are going out and monitoring customer traffic at some of your customer locations to see if an exemption is valid? I'm with Magic on this one - for how long. Fifteen minutes while they buying a cup of coffee and their donut for their morning break?

Give me a break. Please tell me that isn't really so. Could you share what agency are you dealing with? You must have performed your due diligence at the time the exemption was granted and that documentation wasn't sufficient?

I'm would be very interested in a few more details.

Thank the examiners for bringing this to your attention. Cancel all Phase II exemptions. Notify the examiners that you have solved the problem.

Richard,

You know that you and I agree on this issue and actually that would be my recommendation also. But, these are the type of actions taken by field examiners that really need to be questioned and brought to the attention of the heads of the regulatory agencies. You have to admit this is a little over the top.

I listened to John Byrne from the ABA speak on this topic on Tuesday and he indicated that they are very interested in these types of actions in the field. I would recommend that the anon drop John a line concerning this situation.

Unless - of course - this is part of the test of the new interagency exam guidelines

We're FDIC regulated. The BSA exam took 7 days and they said they visited the business "several" times during the exam. I am serious that they staked out the customer's business. They acknowledged, however, that they only visited during the day, not at night or over the weekend. It's a store which targets teen clothing so evenings and weekends should be busier than during school hours. The problem is that the store deposits cash two or three times per day during the day. The FDIC is concerned that by keeping the exemption we could be "aiding and abetting" the store's perceived illegal activity. Certainly, revoking this, or all, of my Phase II exemptions would solve the problem but I'm not interested in spending time filing CTRs that I don't need to file.

I like the contest, actually enjoy it, but I would not fight over this one. I'd revoke the exemption in a heart beat and put them on my high risk list regardless of whether I agreed...just because I've got other things to do. (That's assuming the FDIC doesn't intend to criticize me for any prior actions, they just think I should remove the exemption.)

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I am serious that they staked out the customer's business.

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Did they also listen to police scanners while they were in your bank?

I again encourage you to share this experience with John Byrne.

I'll share with John

Where are you located?

The FDIC examiners are from the Kansas City field office

Could you send those examiners to Florida for a couple weeks to stake out some of my MSB's. The FDIC group we just had from Tampa wasn't interested in this sort of activity at all and my Branch Managers are such whiners about being too busy to visit them.
Kansas City FDIC must budget more hours for their exams.

OCC examiners did the same thing with one of our customers last year. We wound up closing the account. End of hassle.

I agree with you Greg on the MSB issue. It would be nice to get some out there to do some site visits for me too

I'm surprised to see this kind of activity with the examiners, but I guess I shouldn't be.

I agree with the ones that wouldn't fight it... Just do it, and go forward, it's not wortht the fight with examiners in most cases... You might win the fight, but is it worth the war?

I'd only fight it if you can reasonably argue that you did in fact truly know your customer. I suspect that the inconsistency between the business activity and cash deposited was news to you, and must have been fairly obvious to pique the interest of the examiners during their short visit. As such, I wouldn't start whining that examiners are going too far.... this case just may be good evidence as to why they feel that they have to "stake" out places.