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Violation of Reg for a Third Time

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Question: 
When a customer violates Regulation D a third time in a 12-month period, how do most other banks prevent the customer from just opening another savings account to possibly continue excessive transactions? If a Reg D policy is established to prevent multiple savings account opening over a period of time, how do banks monitor such activity among their various branch locations?
Answer: 

To be clear, the customer doesn't violate Regulation D; the bank does when it allows a customer to make excessive transfers or withdrawals from the savings account or MMDA, and still reports the account as a savings account under the regulation.

If a bank's monitoring program is effective, it will eventually identify the customer who makes the "third strike" with the new account, and, if the customer hops to yet another office to repeat those actions, he or she will be identified again.

In my experience in times when interest rates were high enough to make savings and MMD accounts more interesting than NOW accounts (before the days of interest-bearing DDAs), in a bank with over a dozen offices, the number of customers on our "Reg D Problems" was small enough that repeats were pretty easy to spot.

First published on 01/12/2020

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