Your understanding is correct.
If you are thinking about imposing a penalty consider waiving it up to the amount of the RMD once a year. Alternatively, once the customer reaches age 65, but, again, once a year.
Obviously, IRA participants less than 70 1/2 do not have an RMD, they are not being forced to withdraw the funds. (Those who inherited an IRA do have an RMD regardless of their age.) Your bank sold the time deposit knowing some of its customers would be required to withdraw funds at some point and penalizing them for what you knew was going to happen when you made your bargain doesn't look too good.
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.