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#143209 - 12/24/03 06:16 PM OFAC and regulator requirement of automation
DebbieC Offline
Joined: Jul 2001
Posts: 66
Owensboro, KY USA
I read an article on ComplianceHeadquarters that stated that our regulators are considering making it mandatory to automate the process of verifing OFAC. Although I hear lots of recommendations to automate, I have not hear that this was being considered as a requirement. Can the bank regulators do that anyway, since OFAC is separate of itself?

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#143210 - 12/26/03 02:54 PM Re: OFAC and regulator requirement of automation
Pale Rider Offline
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Joined: Aug 2002
Posts: 34,318
under the Lone Star
Regulators and examiners, especially the subject matter experts in IT matters, will offer suggestions along these lines. You are right to think they cannot cite a reg requiring automation, but your relationship with them can be miserable if you don't follow their suggestions.
Societies that do not find work in and of itself "pleasing to God and requisite to Man," tend to be highly corrupt.

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#143211 - 12/26/03 07:06 PM Re: OFAC and regulator requirement of automation
MackenzieS Offline
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Joined: Jul 2002
Posts: 1,722
We have had examiners in here for years trying to get us to automate certain procedures or enhance processes that are currently automated.

For example, our bank's system in not the most advanced and can only compile and report certain amounts of information. For BSA monitoring purposes we utilize custom reports to the best of our ability but without upgrading to a new system we will never have the technology that the examiners want us to have. In the exit meeting for safety and soundness they recommended to the CEO that we need the advanced capability to be able to monitor more efficiently for BSA. He gave them the obligitory "oh yes, I see what you are saying" and hasn't thought about it since.

I agree with the previous poster that you will not likely see this be a regulatory requirement but the examiners can make it tough on you by trying to prove their point. What I mean is that they will search through your documentation until they can find enough exceptions to where they can say "now if you had an automated system you would not have missed these." Something to this nature anyway.

Luckily alot of the automated OFAC software in not very expensive and of all requests for automation by the examiners, this one is relatively inexpensive to implement. Plus it really is a LOT better than the old manual process, especially with all of the updates that come out - just two this week and thats with a federal holiday thrown in the middle.

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#143212 - 12/30/03 02:34 PM Re: OFAC and regulator requirement of automation

I think there is a level of misinterpretation here in what the examiners are ostensibly directing institutions to do. Consider for a moment that the OFAC listing of Specially Designated Nationals and other wanted bad guys is now well over 110 pages -- with each page containing 3 columns of names, addresses, cities, countries, etc. Realistically, it just isn't possible to physically print this document daily, review each page and compare it for changes against the previous day's listing, then take action on any new or deleted names.

Believe me, I'm not one who waves the flag for the examiners, but in this case I have to agree that what the examiners are believing is that no institution -- big bank or small bank -- can realistically manage the OFAC/PATRIOT process by using 100+ pages in a 3-ring binder. Can you imagine new depositors coming in to your branches and you have to consult a 3-ring binder, printed daily, to see if a name is on the listing. It's way too cumbersome and overwhelming.

If I'm understanding correctly what most bankers are being encouraged to do by the examiners it is to explore a more feasible and friendly way to conduct the name-match search instead of doing it with huge manual print-outs and 3-ring binders. There are so many inexpensive web-enabled products now -- i.e., Equifax has one; Bridger Systems; Experian has one; the ABA endorses one; Trans Union has one; ALLTEL has one, Chexsystems etc., etc. -- that actually perform the OFAC search that it's just not feasible to perform this task otherwise. Besides, any examiner would suspect that if it is done manually then days will be missed when the print-out doesn't get printed, pages get lost, people are out sick or on vacation, and the chance that terrorist financing could occur in an institution with this antiquated process is much higher than in institutions that have a more systematic, professional process. "Automation" doesn't mean you're buying servers and software; it just means you're using a vendor's product to make the job easier.

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#143213 - 12/30/03 10:09 PM Re: OFAC and regulator requirement of automation
complyguy Offline
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Joined: May 2001
Posts: 494
What we are being pressured to do is automate for OFAC updates and FinCEN 314(a) requests. The arguments being made are "efficiency" and "human error."

While we will investigate automation options, we will also continue to resist mandates for automation. To reduce the sensitivity level enough to avoid hundreds of false matches (each of which must be investigated, therefore no greater efficiency) is a systemic risk of non-compliance, while human error would be on a case-by-case basis (less risky in my book).

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#143214 - 12/30/03 10:37 PM Re: OFAC and regulator requirement of automation
Andy_Z Offline
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Joined: Oct 2000
Posts: 27,590
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But automation can generally better handle the volumes with less error in the long run. Otherwise it is like producing a journal that a person looks through for similar names. Each journal takes 3 days to accurately review and the journal is produced daily.

I would recommend looking for an affordable solution that can be tweaked to meet your needs. We were happy when we did this at my old bank.
My opinions are not necessarily my employers.
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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