Expected account activity

We currently collected EDD information from commercial accounts which includes expected account activity.

However we are currently under going an OCC exam (yay) and they are taking issue with us not collecting the same "expected activity" from the retail side (personal checking, savings, etc).

My question to you all is, is this actually a necessity and who here does this? Mind you we are a small bank about 750 mill in asset.

My argument has been that we risk score all customers on a monthly basis using our automated system, and according to our yearly BSA risk assessments we are almost always considered low risk using the FFIEC's risk matrix.

On a personal note I feel that collecting expected activity on the retail side will be a colossal waste of time.

I also feel it's a waste of time and we don't do it. We use the historical activity through our BSA software to analyze 'high-risk' retail customers and any 'higher-risk' activities in which they might deal.

Although we perform some minimal CDD on businesses (e.g., the types of transactions in which they will engage and also services they may perform for their customers), the historical activity is what really counts.

Is there any blowback from your examiners because you don't?

I"m trying to justify not collecting such information on the retail side.

As I mentioned the commercial side is very manageable and the way we go about doing it is efficient.

We are examined by the FDIC and, so far, they have not had any comment with regards the retail side.

After going through this same heated discussion with the OCC and FED, we are now collecting this information for retail banking customers.

Do you have a risk assessment that shows why business accounts are an inherently higher risk than retail accounts (more cash intensive, access to ACH origination, etc.)? If so, I'd start there.

See we had an FDIC exam this past July and it was a big issue that we didn't collect this info on consumer side, apparently it's business as usual and it depends on which FDIC office is examining you...

That's exactly what I'm going through now.

I'm on the losing end of this war.

I also need to clarify with them if they expect me to collect this information going forward or if I have to go back and gather this information for my grandfathered existing accounts also.

Jay - my advice is to agree to collect it going forward. I'm guessing you're at a community bank and hopefully you don't have many high risk retail customers (PEPs, NRA's etc.). My argument would be that my retail customers are low risk and it would be a significant burden (cost, time, staffing, etc.) to get this information retroactively. However, you would be willing to do it moving forward. This argument worked for me.

I would refer you to Appendix K in the FFIEC BSA/AML Examination Manual, which shows "...the progressive methods of due dilignece and suspicious activity monitoring systems that banks may deploy...".

Resident CONSUMER accounts are at the low end of the scale. Even at the higher Nonresident Alien CONSUMER accounts, the risk is based on the products and services used by the customer. The bulk of our accounts are at the low end and we rely on the BSA reports generated by our system for both a 'high-risk' customer assessment (type of product, country, HIDTA/HIFCA county) and for risk based on transactional history. I still feel there is no extra benefit derived by having a consumer customer tell you his/her 'expected activity', as it is generally going to be writing checks to pay bills and making deposits (sorry for the over-generalization).

ACB - that's generally my frame of mind, is the burden that it would take to collect this information especially for our customer base.

Doug - that's exactly how we risk rate now with our automated system. Even the NRA's we have aren't high risk because their accounts are all CDs which are non-transactional

This is a big pet peeve of mine - so forgive me as I step on my soapbox.

I throw a fit (respectfully) everytime FDIC tries this with me. I DO risk rate my consumers. ... I get their occupations. That way any activity that goes outside my extensive parameter settings & also is outside what I would expect for their occupation ... it's only then I would do more CDD.

There is NO way I'm going to do the same DD with a consumer that I do with a business. It's completely unneccesarry for my customer base and risk level. Granted, if you're a troubled bank and you can't get your business DD under control, I could see an examiner pressing the issue. However, if your BSA program is otherwise solid, there should be no reason to "require" a scoring method for your consumers.

I do conduct a little more CDD when I'm dealing with Foreign customers, but only to the point of reviewing them on a scheduled basis, instead of "when an alert hits".


The more banks that allow this to be pushed onto them, the more examiners will consider it "best practice" & "industry standard".

After opening accounts for many years and was in a bank that asked those types of questions. I can not remember anytime when a customer claimed that they were going to process cash deposits of 9,000 - 9999 daily or process wire transfers to Iran. FWIW based upon the suggestion that you obtain it; if a customer told me that information, would it be considered expected account activity where I would not have to report it. I do not think so.

Ditto what Wonder Woman said above. I stand firm on this as well, and I'm not doing it for the exact reasons WW mentioned.

Also, EdAudit is right, what consumer customer is going to tell you anything different than, "it's a household account to pay bills"? I think everyone knows what a consumer account expected activity is...paying household bills, purchasing things, etc. If you see something different than that or your automated system picks up on something then look at it.

It's one of those "You can never be too rich, too thin, have too much Tuperware, or have too much due diligence to please an OCC examiner (and certain FDIC examiners...)"

As many have said - it's a COLOSSAL waste of time and simply diverts your resources from noticing and investigating TRULY suspicious activity. I wish we, as an industry, could get FinCEN to have a nice long chat with these examiners to have them STOP making us chase wild geese so that we could actually, you know, CATCH REAL CRIMINALS!

How about this - have a "default" list of expected activity: Deposit of paychecks, pay household expenses by check, ACH or Bill Pay, use a debit card for personal purchases, withdraw cash from ATM for personal use, and expected activity will not be more than $10,000 in cash on any given day.

If you have a customer that tells you anything different, well then, you might have:
1. A potential money launderer 0R
2. A great opportunity to cross sell additional banking services because this person is running their own side business

I would LOVE to have one of these examiners on the other end of a grilling over BSA/AML, unfortunately a lot of them simply open their accounts at a federal employee credit union where BSA is not a big deal.

It is my experience having worked in and for two different Federal Agencies (DOD and DOT (FAA)), that banking examiners are not standardized in their training or experience. There is a huge standards disconnect between FinCEN and the regulators. I've also seen this talking to pistol-packing IRS agents, who smirked about getting written up for Retired on a CTR. And thus, discussions like this are inevitable. What the country needs is leadership at the top directing the best course of action. I'm sure examiner training standardization is not even mentioned on their to-do lists. Seriously, I think they are more worried about where they are scheduled for lunch tomorrow.

JJ - I just realized that you are located in NY (Sorry, I'm a bit slow). If you have the same examiners I did, I would not recommend fighting this issue, as it's a big issue for them.

PM me if want to discuss offline.

Just for an update, they backed down from their stance on wanting us collect that information at account opening.

I recited the FFIEC BSA guidelines, noted there are no requirements for that, fought tooth and nail, but I won.

Chalk one up for the BSA team.

Congrats

Nice job Jay!

Admittedly, I get a sick thrill from arguing with auditors and examiners about what they feel I should do and why I feel I shouldn't.

Even executive management commended me on not backing down.

Bullies.

GREAT!

Nice work Jay. I'd be very interested in hearing about your experience offline.