Good Morning. My FI currently has the Fraud and BSA/AML/OFAC Groups separate. The Fraud group files SARs of Fraud related items, i.e. Elder, Debit Fraud, Identity Theft, etc. When we run our EDD scoring, the SARs filed by the Fraud Group are within the pool of EDDs and have been reviewed by the BSA/AML/OFAC Group in the past. What is the general consensus or practice for review of these customers? Does the BSA Group always review the Fraud customers within the all pool or does the Fraud Group review their own customers for EDD?

First - Welcome to BOL!

Great question and this will probably depend on the size of the financial institution as there isn't a rule dictating this. How large is your organization?

Thank you for the welcome. We are a Savings and Loan with $14b assets size.

At your size, you will probably get mixed answers though there really isn't a right or wrong way - you just want to be consistent in what you do across all sub-departments. I'm sure a few others from larger institutions will chime in on their practices.

We also have a separate fraud and BSA department, but all SARs are filed by the BSA department and we do all EDD reviews if our BSA risk model identifies the customer as high risk. But we would close an account if we felt the customer was involved in the fraud. In most cases, our customer is a victim.

I'm not a big fan of assigning extra high points within an AML monitoring system for SAR filings for this reason. In most systems you can't distinguish the customer that is a victim from the subject and the customer that is a victim gets tagged as being high risk when they may not be. For us, a customer that is the SUBJECT of a SAR is higher risk, but they are monitored every 90 days to determine if a supplemental review needs to be performed and we track them separately. When asked for a list of high risk customers we include any customers that are "active" SAR customers.

For context, we are over $10 billion.

Every bank operates differently, but I will say that I don’t really understand why a fraud team would conduct an EDD, or maybe more specifically what the purpose of an EDD conducted by a fraud team would be and what they were looking for.

For my money, the AML team would be better equipped to build a profile for customers and to identify unusual activity that wasn’t expected or profiled for, whereas the fraud team would be better equipped to identify additional fraud. Due diligence in my eyes is BSA obligation both by regulation and for practicality. I’ll also say that our EDDs for fraud victims are very streamlined – they’re generally not the types of customers we feel we need to spend a ton of time on.