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#376704 - 06/23/05 07:30 PM Trust accounts again - monitoring for AML
Trees Offline
Power Poster
Joined: Apr 2005
Posts: 4,013
I am in the process or performing my risk assessment and need some suggestions on how to set up the risk monitoring process for trust accounts (i.e. estates, etc.) as they are managed in a trust dept. I asked this question earlier but I think it was too vague. I can't find much guidance on the subject and was hoping that someone has had some experience with their regulator in terms of their expectations regarding these types of accounts. Thank!

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BSA/AML/CIP/OFAC Forum
#376705 - 06/23/05 10:57 PM Re: Trust accounts again - monitoring for AML
Anonymous
Unregistered

It would also be useful to get some specific examples of suspicious activity for the Trust area.

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#376706 - 06/24/05 02:17 PM Re: Trust accounts again - monitoring for AML
KSK Offline
Gold Star
KSK
Joined: Jul 2001
Posts: 357
Kansas
Here's the process I've implemented in our Trust division. It hasn't been the target of regulatory criticism, but as you know the devil is in the details and how the process is implemented. One additional note - although our trust division is 2.5 billion in assets, it is still operated very much like a small trust division - we know our clients. Most clients have a connection to the bank, existing clients, and/or community, so to start with we deal largely with people we know.

Account acceptance - approval by committee. Must have CIP information along with all other information for consideration.

Initial account review (aka 60-day review) - presentation by trust officer to committee. Must attest to the accuracy of the system set-up and coding, including the setting-up of all interested parties. On review form define the types of "normal" activity that is expected and permissible under the terms of the govening document. This definition sets the standard that all account activity for that particular account is measured.

Daily the trust officer is responsible for reviewing the prior days trransactions. By definition if transactions don't fit in the definition of what has been defined as "normal" - it's abnormal and must be reported with 3 business days of the transaction to the compliance officer (me).

Upon notification of abnormal activity, I review the transactions, documentation regarding the transaction, and review the governing document. I prepare a report on my findings and submit to the BSA officer for potential SAR filing.

Annual review (we incorporate both investment and administrative review into one process). Trust officer again defines "normal" activity for the account and explains any changes from a prior definition of normal. Trust Officer affirms their review and monitoring of daily activity by responses to various questions on the review form. They attest to the fact that with the exception of specifically cited instances/incidents reported to the compliance officer all account activity during the review period is consistent with the definition of "normal" activity for that particular account.

Internal audit includes testing in their process (or atleast in their risk assessment to determine whehter testing should be done). Since I was largely responsible for the development of the process and am a member of the account acceptance account review committees, I don't conduct testing on this aspect because of a lack of independence in the process.

That said, I can be a tough task master if something isn't right on the front-end. the only part I don't have a hand in is the daily review and monitoring of account transactions....but then this comes back to one of my earlier statements...we know the majority of our clients

Hope this helps

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#376707 - 06/24/05 03:16 PM Re: Trust accounts again - monitoring for AML
Trees Offline
Power Poster
Joined: Apr 2005
Posts: 4,013
You have been very helpful. Your approval process and customer type is like ours - people we know. When you define "normal activity" what are you incorporating? For example, expected wire activity, expected monies that may come in (especially for an account that has been on the books for over one year..I know some money may straggle in after an account has been transferred from another bank). I was thinking about setting some hurdle, say $100,000. and any money coming in after that would have to be documented as to source. Also, like you, I would have these cases brought to my attention. I have asked the department to run OFACS on unknown charities, etc. for which they have been given instructions to send money. Also, do you have the "bnormal activity" reports made to you in a report, or by copy of some form you developed? Thanks for your input!

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#376708 - 06/24/05 03:27 PM Re: Trust accounts again - monitoring for AML
KSK Offline
Gold Star
KSK
Joined: Jul 2001
Posts: 357
Kansas
Identification of normal activity is broken out into 2 areas "Inflows" and "Outflows". "Inflows" could be things like: 1) Cash, Check ACH or wire from customer or on the customer's behalf; 2)recurring receipt of pension, retirment, or annuity; 3) Trsf from another trust dept account; 4) trsf from an account at our bank; 5) receipt of assets in kind; 5) receipt of loan repayments; 6) asset sales, receipt of interest, dividends, splits, settlements, or similar activity; 6) other - define. The "Outflows" would pretty much be the opposite.

Training staff on the proper completion was sometimes a challenge, because they need to think about not only the gathering and depositing of assets, but also the day-to-day types of activities. Initially, staff also got tripped up on existing irrevocable trusts - where generally speaking there are no ongoing receipts other than interest and div type activity.

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