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#693456 - 02/26/07 09:09 PM Customer Due Diligence/Monitoring Help
hawkfan Offline
Joined: Feb 2006
Posts: 83
We are having a horrible time trying to come with a system of risk-rating and monitoring our customers. We do not have any fancy software to help us in the process. Basically what we implemented last year was a system that we pulled all customers the fell into certain categories (MSB's, cash intensive, certain foreign, SAR suspects etc.). We then would risk-rate these customers and from there would have our high-risk customers. The problem was (from FDIC exam), they didn't feel we were looking at enough customers. Through our system, we were looking at about 100 of our 2000 business customers. We are having a hard time of figuring out a good system to pull in more customers. The examiner won't specify what amount will make them happy, but we need a lot more. Any help or guidance in this issue would be great. Or sharing what other banks do if have to do it manual? And how you document this and monitor. This has been a big headache and we are trying to come up with a structured system that will pull in more customers to be risk-rated. The examiner is only worried about business customers, and we do not feel or want to go through every business customer (examiner doesn't say we need to go that far). Any help would be appreciated!

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#693547 - 02/26/07 10:19 PM Re: Customer Due Diligence/Monitoring Help hawkfan
Will C. Offline
New Poster
Will C.
Joined: Aug 2003
Posts: 3
We were in a similar situation last year. We pulled a list of all commercial accounts and had the lenders and managers examine it. They would note what type of business each was. Then when risk rating we included attorney's, car dealers, jewel ang gem dealers, real estate brokers, securities brokers etc. This greatly expanded the list. Now when a business account is opened we have a questionnaire that the PBR must complete asking about the type of business and activity that is anticipated on the account. This gives us a basic risk level at account opening.

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#693619 - 02/27/07 01:06 AM Re: Customer Due Diligence/Monitoring Help Will C.
MagicCity Offline

Power Poster
Joined: Apr 2003
Posts: 3,003
Fort Lauderdale, Florida
Will C. is correct.
Have your application ask the question so moving forward you know what each customer does.
With the existing portfolio,I would pull all cash customers, foreign wire customers, high volume wire customers, broker dealers, NRA's, etc.
I think the examiners would like to see a randam sampling of accounts as well.
So separate from those you have chosen to mark as high risk, pick another 10% randomly and review two months of their activity.

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#694568 - 02/28/07 04:52 PM Re: Customer Due Diligence/Monitoring Help MagicCity
Rosie O'Grady Offline
Gold Star
Rosie O'Grady
Joined: Nov 2005
Posts: 438
Here are specs for an additional report to pick up both retail and consumer activity. We had our programming folks develop a table for each condition and accounts that had 4 points got reported.

Risk Analysis Checklist
For BSA and AML

1 Customer had $25,000 or more in cash transactions within last 30 days. +1

2 Customer had 5 or more cash transactions > $500 within last 30 days +1

3 Customer had $10,000 or more in cash transactions two of the +1
past three months (rolling months from date of prgm execution -every Sun)

4 Customer had $10,000 or more in cash transactions five of the +1
past six months (rolling months)

5 Customer's account is a consumer (or non-business) account. +1
(Add point if conditions 1, or 2, or 3, or 4, or 7, or 9, or 10, or 12, or
13 are true)

6 Account with the CU is less than one year old +1
(Add point if conditions 1, or 2, or 3, or 4, or 7, or 9, or 10, or 12, or
13 are true)

7 Customer's account has wire activity, cash deposit/withdrawal, +1
& purchase of a monetary instrument within last 30 days

8 Customer has a loan relationship (Taxowner, nontaxowner, or signatory) yes, -1
with CU no, +1
(Add point if conditions 1, or 2, or 3, or 4, or 7, or 9, or 10, or 12, or
13 are true)

9 Customer makes a cash deposit > $500 & withdraws cash the same day +1

10 Customer has incoming or outgoing wires > $10K +1

11 The customer consistently uses the same branch to conduct yes, -1
his business. Less than or = 2 different locations within last 30 days no, +1
(Add point if conditions 1, or 2, or 3, or 4, or 7, or 9, or 10, or 12, or
13 are true)

12 One or more instances in last week where customer made 1
cash deposits to 2 or more related accounts and total of deposits is
between $5K and $10K

13 A review of the member's daily activity shows new Deposits +1
and Wire Transfers on the same day.

14 A review of the customer's daily credit transactions indicate yes, +1
that he is using the account for structuring or sweeps.(# of credit no, -1
transactions (excluding transfers & xdep) exceed 10 in last 30 days

15 Cash deposit over $10K is made that is 150% of average cash deposits 1
made over the last 6 months

16 Purchase of monetary instrument > $3K 1
(Traveler's Checks, Money Orders, Official Checks)

17 Accountholder is a non-resident alien 1

18 Keyword in Account Title or POS/ACH transaction 1

19 Customer's Account is within the category of High Risk Business. Yes, +2

20 Customer's Account is defined as an MSB Yes, +2

21 Customer is a resident or NRA or has out of country address AND has Cash or wire
activity GEQ $3,000 Yes, +4
3 or less - probably not a problem

Accounts with = or > 4 will be added to table for reporting

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