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#1611735 - 10/03/11 06:18 PM Closing account for suspicious activity
WHAT ?!?! Offline
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WHAT ?!?!
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Is it written down anywhere that the BSA Officer and / or some Board Committee will make the decision in closing down an account for suspicious or high risk activity? That is what is written in our policy, however some members of management want to have a say in the matter. I tried to tell them these decisions to be done without any influence of senior management. Is there something in writing I can take back to them and show them it is required to be done this way?

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#1611740 - 10/03/11 06:26 PM Re: Closing account for suspicious activity WHAT ?!?!
BrendaC Offline
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No regulatory directive. The determination as to whether an account or relationship should be terminated remains a matter of bank policy.
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#1611749 - 10/03/11 06:45 PM Re: Closing account for suspicious activity WHAT ?!?!
Elwood P. Dowd Offline
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Agreed. Actually, I'm more familiar with the scenario where the BSA or Security officer might make a written recommendation that an account be closed and that management would actually make the decision.

However, the fact that it is written into your policy suggests that a considered, balanced decision was made to do things a bit more conservatively. What it comes down to now is whether or not your policy is worth the paper (screen) it is written on.
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#1611763 - 10/03/11 07:11 PM Re: Closing account for suspicious activity Elwood P. Dowd
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The decision to file a SAR is a regulatory one and should remain with the BSA Officer.

The decision to close an account is a management decision; the BSA Officer should recommend to the appropriate parties to close an account, but should not make a final decision (unless that is what the Board wants).
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#1611764 - 10/03/11 07:11 PM Re: Closing account for suspicious activity Elwood P. Dowd
John Burnett Offline
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There is one piece of regulatory guidance on the question. In the BSA/AML Exam Manual (page 76 of the 2010 edition), we find
Quote:
Banks should be aware that law enforcement may have an interest in ensuring that certain accounts remain open notwithstanding suspicious or potential criminal activity in connection with those accounts. If a law enforcement agency requests that a bank maintain a particular account, the bank should ask for a written request. The written request should indicate that the agency has requested that the bank maintain the account and the purpose and duration of the request. Ultimately, the decision to maintain or close an account should be made by a bank in accordance with its own standards and guidelines.


The text implies that a bank should have standards and guidelines for closing accounts, particularly those related to suspicious activity.
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#1611779 - 10/03/11 07:25 PM Re: Closing account for suspicious activity John Burnett
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I am old enough to remember that when the SAR first came out, you were not allowed to close an account if a SAR was filed on it. Is my memory correct?
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#1611783 - 10/03/11 07:33 PM Re: Closing account for suspicious activity BC78a
John Burnett Offline
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I am older than that (I remember the "Report of Suspected Criminal Activity," the precursor of the SAR), and I don't recall any such prohibition.

Neither one of us, of course, is wrong. One of us has simply forgotten or remembered wrong.

What were we talking about?

See how good my memory was? It was, in fact, the Criminal Referral Form, not the Report of Suspected Criminal Activity. I'd like to say that the person who pointed that out to me is older than I, but that would be childish and, worse, inaccurate.
Last edited by John Burnett; 10/04/11 03:38 PM. Reason: Added
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#1611784 - 10/03/11 07:35 PM Re: Closing account for suspicious activity John Burnett
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I laughed John. Well played.
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#1611928 - 10/04/11 12:13 AM Re: Closing account for suspicious activity John Burnett
Princess Romeo Offline

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Originally Posted By: John Burnett
I am older than that (I remember the "Report of Suspected Criminal Activity," the precursor of the SAR),


Wait - I'm lost. Was that before or after the Criminal Referral Form (aka the form that no bank in their right mind would dare to file because of the liability which still causes some bank attorneys to try and quash a SAR, but I digress....)
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#1611935 - 10/04/11 09:48 AM Re: Closing account for suspicious activity Princess Romeo
Elwood P. Dowd Offline
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Princess,
Do you mean the "short" or the "long" version of the Criminal Referral Form ? The FDIC version or the FRB version?

Pass the Geritol , please.

BC78a,
There has never been a form filing that would preclude you from closing an account.
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#1611994 - 10/04/11 02:22 PM Re: Closing account for suspicious activity Elwood P. Dowd
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I guess my memory is wrong - Sorry
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#1612082 - 10/04/11 03:38 PM Re: Closing account for suspicious activity BC78a
pweiss Offline
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SAR are sometimes subjective and each case is different but it's a common practice to send a closing account letter after the 3rd SAR is filed on the same continous activitiy?

For example, you file a SAR and after your 90-day review you file a 2nd SAR for the same activity. Then again, after an additional 90-day review of that 2nd SAR you file again (3rd time) on the same activity... you would make the business decision to close the account.

I've heard examiners question why accounts are left open after continuous SARs have been filed on the same activity. Further more, you FI probably doesn't want the possible liability because it will be questioned. I have closed accounts in the past for subsequent SAR filing and never had any push back my management or examiners. With all that said, every situation is different. I wouldn't close out an account necessarily if I had filed 3 SARs on a customer over a 5 year period.
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#1612087 - 10/04/11 03:44 PM Re: Closing account for suspicious activity pweiss
John Burnett Offline
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We've all heard (and perhaps been zapped by) war stories about management or board members who resisted the closing of SAR frequent flyer accounts. I honestly don't think, pweiss, that all or even most banks kick accounts to the curb right after the 3rd SAR filing, even though I'd recommend that a third SAR is certainly a strong argument for cutting your losses on an account. It costs dearly to do the extra monitoring, analysis and creative writing to keep churning out SAR after SAR after SAR, and today's margins on deposit funds are pretty darned slim to start with!
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#1612107 - 10/04/11 03:57 PM Re: Closing account for suspicious activity John Burnett
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You're probably right John about the number of banks that will actually kick accounts to the curb. Your points described are the main reasons why I personally have done in the past. The practice of 3 strikes and your out is definitely a conservative approach and also might be a regional thing since I work in a HIFCA & HIDTA (and the fact my ex-employer had a MOU and my ex-CCO consulted for bank that had a cease and desist order. Good times!
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#1612130 - 10/04/11 04:09 PM Re: Closing account for suspicious activity pweiss
Kathleen O. Blanchard Offline

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At my last bank management never wanted to close accounts. Finally, legal and I (risk) made the case by asking how much staff and floorspace BSA would be authorized to have to keep managing the growing caseload.
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#1612502 - 10/04/11 09:15 PM Re: Closing account for suspicious activity John Burnett
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Originally Posted By: John Burnett
We've all heard (and perhaps been zapped by) war stories about management or board members who resisted the closing of SAR frequent flyer accounts. I honestly don't think, pweiss, that all or even most banks kick accounts to the curb right after the 3rd SAR filing, even though I'd recommend that a third SAR is certainly a strong argument for cutting your losses on an account. It costs dearly to do the extra monitoring, analysis and creative writing to keep churning out SAR after SAR after SAR, and today's margins on deposit funds are pretty darned slim to start with!


You are 100% right John. From my contacts in the NY metro area, I can all but assure you that banks in this area are maintaining accounts for customers where there have been more than 7 SARs filed. Granted, these are basic structuring and not anything related to ML, TF or DT.

At the end of the day, if the relationship is profitable (deposits, loans, fees, etc.), that relationship isn't going anywhere. Pweiss, if you have that level of authority and Management supports you, I envy you.
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#1612698 - 10/05/11 03:38 PM Re: Closing account for suspicious activity ACBbank
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I am also wrestling with this. A "good" customer creates SAR events all of the time. Lots of cash and structuring and Management is not a fan of closing. Any other examples to share out there?
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#1612710 - 10/05/11 03:54 PM Re: Closing account for suspicious activity BSA all the way
John Burnett Offline
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What's easier -- Investigating to find out if the apparent structuring is actually reflective of normal, expected cash activity for the business, or completing an ongoing series of SARs? The former might give you an "out" from filing in the future. On the other hand, a simple update each 90 days isn't all that costly, as long as it doesn't take a lot of digging each quarter for the information.

Sometimes (although not often enough, I think), these customer relationships really ARE profitable even after applying your monitoring and SAR costs.
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#1612738 - 10/05/11 04:25 PM Re: Closing account for suspicious activity John Burnett
Elwood P. Dowd Offline
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From the lectern, I've heard representatives from each of the federal functional regualtory agencies opine that they do not tell banks to close accounts. Field examiners obviously don't attend those presentations because they frequently tell banks to close accounts for suspicious activity or frequent SAR filings. They do not, however, put that in the written report.

The Handbook indicates the bank should have a process for repetivive SAR filings:

The bank should develop policies, procedures, and processes indicating when to escalate issues or problems identified as the result of repeat SAR filings on accounts. The procedures should include:
* Review by senior management and legal staff (e.g., BSA compliance officer or SAR committee).
* Criteria for when analysis of the overall customer relationship is necessary.
* Criteria for whether and, if so, when to close the account.
* Criteria for when to notify law enforcement, if appropriate.


"Should I close" decisions are as subjective as "Should I file" decsions. Before you do either, you need to build a decision making mechanism that reflects objectivity and consistency.

The irony is and will remain that it makes no sense to file repetivite SARs unless the customer is very profitable. Otherwise, they should be given the boot after the first one.
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#1612767 - 10/05/11 05:04 PM Re: Closing account for suspicious activity John Burnett
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I wanted to elaborate on my earlier post above regarding my mention about a common practice to close an account after 3 SARs.

Profitability is kept in the back of our minds when deciding to close an account. We do file mostly structuring SARs but we keep in mind "defensive filing" (as FinCEN has asked people to shy away from) and a lot of times we will just watch-list the account. Reviewing cash activity is easy and almost everytime we discover this is normal account activity (explained) or isolated. We do file on blantant structuring ($9,900..etc)

All of the accounts that we have closed were kiting, counterfeit, fraud, or false statements. A lot of people see SAR or suspicious activity and think structuring and that isn't always the case. I can't remember ever closing an account for structuring. If I had multiple structuring SARs on a single account most likely I think I would be able to explain the reason to keep the account open. I am not the IRS and if I can demonstrate that there is no money laundering going on by way of the debits and other transactions I think I would be fine to leave the account open.

As I stated in my above post, SARs are subjective and that is why there are no directives on closing accounts. I come from a breed of conservative management (due to MOUs) and if a SAR is filed or continously filed and there is a potential for loss, it will be analyzed and most likely closed.

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#1612897 - 10/05/11 07:20 PM Re: Closing account for suspicious activity pweiss
John Burnett Offline
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I like the way you've analyzed this pweiss. I think it makes sense to look at it that way. However, I don't think that the majority of banks have come to that conclusion yet.
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#1613189 - 10/06/11 02:21 PM Re: Closing account for suspicious activity John Burnett
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My bank is the same as pweiss. We file a lot of SARs for structuring and unless there is kiting or some other activity that could lead to a loss, we seldom close the accounts. The majority of our customers that structure are foreign customers who are from a culture where the government restricts the transactions. Therefore when they come to the US, they continue in what they know.

We have an automated AML program that identifies these cases and we have a formatted SAR form that we basically fill in the blanks. These are less time consuming than the kiting or tax evasion customers and we have never suffered a loss from someone who was structuring their incoming cash and outgoing wires.

Its annoying and life would be simpler if they would stop but I have been at this a while and so far, it hasnt changed.

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