I'm curious as to how many banks are industry coding their business customers. I know this isn't a requirement based on the exam manual, but are regulators really wanting to see banks do this? I think it's a good idea, but we are only a $170M bank, and I don't know if it's necessary. Any thoughts would be appreciated, thanks!

We do and I think most banks do.
It helps to review the activity by the type of business as you can spot someone whose activity differs from the rest.

We also do industry codes. We have trained the new account staff do this this part and I review annually. This helps identify possible high risk accounts.

In addition, when you use "business standards" in this case the industry codes, it demonstrates that you are working proactively in preventing, detecting, reporting, and correcting any signs of criminal or suspicious activity.

Eventhough, is not a requirement yet...I'm sure that on the next revision of the manual they might implement it...

You are a small bank, that's even better....you have fewer business customers do code now...than 2-5 years from today..

We are a 300M bank, and we are implementing the industry code for easy identification of HIGH risk accounts...

For those who code - does your platform system have a pulldown menu or something for the account opening person to use or what is your source of codes?

We use NAICS codes. Although they are available on our system, the NAICS code search on their web site is the preferred method of wading through the code options.

And don't forget ... just because the business customer's industry may defined as a high-risk industry ... that does automatically indicate the customer is "high risk" and has to be monitored as such.

But I'm curious about the industry coding ... is this a separate coding on the computer system in addition to the overall risk rating of the customer? Just thinking out loud ... isn't the industry code a component of the overall customer's risk rating?

It is just one of the factors we use to determine customer risk.

Consider too that the NAICS codes aren't the only way to go. Developing a coding system that only identifies the persons and entities subject to expanded examination overview can be perfectly adequate for a small bank. For example, assign a specific code to each NRA, NBFI, cash intensive business, etc.

We're getting ready to code all business customers to start -- curious as to how far you drilled down with the NAICS codes, or did you only code with two digits as to the type of business. Would anyone be willing to share their method and corresponding risk ratings?