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#2175988 - 05/01/18 12:51 PM Closing accounts for Reg D excessive transactions
corporate audit Offline
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Joined: May 2008
Posts: 35
Is there any requirement around how much time a Bank has to close an account after the 3rd Reg D excessive transaction violation?

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Operations Compliance
#2176000 - 05/01/18 01:41 PM Re: Closing accounts for Reg D excessive transactions corporate audit
rlcarey Online
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rlcarey
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Galveston, TX
Since you have already sent them warning letters, I would not expect much of a delay after discovery. Anything more than a couple of days is going to raise the examiner's eyebrows.
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#2176041 - 05/01/18 03:13 PM Re: Closing accounts for Reg D excessive transactions rlcarey
corporate audit Offline
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Joined: May 2008
Posts: 35
So I guess waiting 2-3 weeks is a bit excessive? Seems that is what we are finding during our Audit.

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#2176076 - 05/01/18 04:22 PM Re: Closing accounts for Reg D excessive transactions corporate audit
burkemi Offline
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Joined: Nov 2013
Posts: 549
I would think 2 - 3 weeks is too long. Our process here is: Strike 1 - We send a letter that states after 3 strikes the account will be changed to checking. Strike 2 - We send a letter that states after 3 strikes the account will be changed to checking. Strike 3 - On the day we send the letter, the account has been converted. We send a letter that states this is your third offense, here is your new checking account features.
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#2176080 - 05/01/18 04:36 PM Re: Closing accounts for Reg D excessive transactions corporate audit
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,658
Originally Posted By corporate audit
So I guess waiting 2-3 weeks is a bit excessive? Seems that is what we are finding during our Audit.
It may be, depending on the particular circumstances. The three strike rule is not a requirement of Regulation D, but an accepted best practice which comes from a Fed staff opinion:

"For this reason, the Board has applied a general rule that an institution may continue to consider an account an MMDA even if there are excess transfers so long as those excess transfers are not the result of an attempt to evade the transfer limits, and if the excess transfers occur in not more than three months during any 12-month period. This working rule is not absolute, however, and the facts and circumstances must be considered in each case."

Is this an audit you are writing, or is the auditor writing you up?
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#2176111 - 05/01/18 05:42 PM Re: Closing accounts for Reg D excessive transactions Adam Witmer
corporate audit Offline
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Joined: May 2008
Posts: 35
I'm the auditor. Trying to determine if the 2-3 week timeframe is to long.

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#2176160 - 05/01/18 07:05 PM Re: Closing accounts for Reg D excessive transactions corporate audit
BrianC Online
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BrianC
Joined: Nov 2004
Posts: 6,694
Illinois
If we are talking a money market account, then giving a customer 10 business days before closing an account may be reasonable to ensure that any outstanding checks can clear. Also, if the account receives direct deposit of social security benefits, the Green Book requires that we give the customer 30 days.

Since in 25 years of banking I have yet to read an enforcement action that involves a Reg D violation, as an auditor, I'd be chasing higher risk fish than this.
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#2176166 - 05/01/18 07:08 PM Re: Closing accounts for Reg D excessive transactions corporate audit
rlcarey Online
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rlcarey
Joined: Jul 2001
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Galveston, TX
Just change the product code for internal accounting to an interest bearing DDA account and move on - it takes 10 seconds - no muss - no fuss with the customer. Some banks have gone to doing that at the first violation - it eliminates any letters or further tracking.
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#2176203 - 05/01/18 08:34 PM Re: Closing accounts for Reg D excessive transactions corporate audit
David Dickinson Offline
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David Dickinson
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Central City, NE
Quote:
Since in 25 years of banking I have yet to read an enforcement action that involves a Reg D violation, as an auditor, I'd be chasing higher risk fish than this.

Good point!
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