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#187961 - 05/07/04 04:37 PM New Accounts Risk Assessment
Anonymous
Unregistered

Hi Everyone. Happy Friday! I've just been assigned the daunting task of adding Risk Assessment procedures to our New Accounts Policy...Im new to Compliance so Im looking for a little help. Is anyone out there willing to share some ideas? Im looking for ideas on how you would rate different types of personal and business accounts. Which ones would you rate as High, Medium, or Low risk etc...For example, If someone opens a business account and they are a pawn shop-you would rate them as High Risk.

Or on the personal side, if a customer opens an account with 2 primary forms of ID, you would rate the account as "low risk"...

I think Im on the right track here, but I'm having trouble finding a place to start. Any and all suggestions, tips, advice from Guru's, BOL'ers, and the like would be most appreciated.

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#187962 - 05/10/04 03:36 PM Re: New Accounts Risk Assessment
Anonymous
Unregistered

I'd like to expand on this a little and maybe I'll get some responses. Are there any JackHenry users out there that are using the new Risk Rating Method? Rating the accounts as they are opened on the system is easy enough, but do you have any suggestions, tips, etc. on how you included this into your new accounts policy? Did you set guidlines on what is considered Low vs. High risk? Again, any help would be appreciated. Thanks all-sorry about the anon, im still tying to figure this thing out!

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#187963 - 05/10/04 09:17 PM Re: New Accounts Risk Assessment
Cathy P Offline
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Cathy P
Joined: Jan 2003
Posts: 318
NE
I'm in the Bank Secrecy/money laundering mode today, but you might look at the types of entities that you can't exempt from CTR reporting (car dealerships, casinos, etc.) They could probably be used for ideas of high risk businesses. They cannot be exempted because they generally can be front-businesses for money launders or can be high-cash businesses.

I'm not sure how you would go about assessing personal accounts unless you review internal reports such as check-kiting, Reg D violators (too many withdrawals/transfers from MMK & savings accounts), etc. and assess them after the account has been open awhile.

Hope this helps.

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#187964 - 05/10/04 09:32 PM Re: New Accounts Risk Assessment
mrenderman Offline
100 Club
mrenderman
Joined: May 2003
Posts: 123
Wisconsin
The procedure that we follow for new accounts is as follows:
1. A new savings account - we verify their identity per the Patriot Act, get two forms of identification and check against the OFAC list. Then the account can be opened.
2. A new checking account - we verify their identity per the Patriot Act, get two forms of identifcation, check against the OFAC list and pull a credit bureau and they must have a score of 600 or higher.
We are a small rural community bank. We open all accounts in person and do not have internet banking or other electronic means of opening accounts. We take what I guess you could call, the laid back approach to opening new account with minimal risk.

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#187965 - 05/10/04 09:40 PM Re: New Accounts Risk Assessment
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Here's a related thread. If you search on "high risk" you will find others. I'll attempt to draw some comments for you by saying something a lot of folks appear to disagree with:

When you are setting up your monitoring program, spend most of your effort on businesses. I've seen "scoring systems" that rank consumers from 1 to 10. Frankly, I believe they make a lot of distinctions based on very little in the way of differences. Some of these scoring systems use criteria that are simply not indicia of the likelihood that a consumer's account would be used to launder money or serve as a conduit for terrorist financing. For me, I would have to have perfected my monitoring system on businesses before I would expend the time and effort distinguishing between consumers other than citizens vs. non citizens.
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#187966 - 05/10/04 10:50 PM Re: New Accounts Risk Assessment
Princess Romeo Offline

Power Poster
Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Quote:

Here's a related thread. If you search on "high risk" you will find others. I'll attempt to draw some comments for you by saying something a lot of folks appear to disagree with:

When you are setting up your monitoring program, spend most of your effort on businesses. I've seen "scoring systems" that rank consumers from 1 to 10. Frankly, I believe they make a lot of distinctions based on very little in the way of differences. Some of these scoring systems use criteria that are simply not indicia of the likelihood that a consumer's account would be used to launder money or serve as a conduit for terrorist financing. For me, I would have to have perfected my monitoring system on businesses before I would expend the time and effort distinguishing between consumers other than citizens vs. non citizens.




However, if you conduct a review of high-volume accounts, and you find consumer accounts with a high volume of cash deposits followed by monetary instrument purchases, wires, etc., then I would say you would bump that account into the "high risk" category.

I would also be leery of systems that would risk rank based on lifestyle as you could start down a slippery slope of profiling based on marital status, age, ethnicity, gender, gender orientation, etc. And while there are no "Fair Deposit" regulations as we have for Fair Lending, we are just begging the issue.

I guess the main thing is anytime you have a consumer account that appears to be used like a business account (lots of cash, wires, monetary instruments, etc.), then you should be reviewing that account if only to determine if the account should be reclassified (and charged!) as a business account.
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#187967 - 05/11/04 01:21 PM Re: New Accounts Risk Assessment
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Quote:

However, if you conduct a review of high-volume accounts, and you find consumer accounts with a high volume of cash deposits followed by monetary instrument purchases, wires, etc., then I would say you would bump that account into the "high risk" category.




Actually, in my book, that one would merit its own investigation, beginning now.
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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.

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