Independent Banker - November 2017 - 68

Risks & Rules
" The first line of defense at a financial institution
is the employee. It is important to train them to
be alert to something that just doesn't seem right
for a customer and to report such activity to their
supervisor or the BSA officer for investigation. "
-LEDRA FINLEY, COMPUTER SERVICES, INC.
buy any software they need. "
But considering its size and rural
locale, Farmers Bank & Trust is
arguably better staffed than similar
community banks; it boasts one BSA
officer, who is responsible for the
community bank's overall policies
and procedures, and two assistant
BSA officers, one who oversees
Currency Transaction Reports
and exemptions, and another who
monitors customer activity, including
Office of Foreign Assets Control
(OFAC) reporting. All three are fulltime
employees but also hold duties
outside of compliance, says Cook.
" This is a challenging area for
institutions of all sizes, particularly
for community banks, " says Daniel P.
Stipano, partner at Buckley Sandler
LLP and former deputy chief counsel
at the Office of the Comptroller of the
Currency. " Money launderers, drug
traffickers and bad actors will look
for weak links, and in many cases,
community banks simply don't have
the same resources and the same
expertise as larger institutions. "
While that does not necessarily
mean that community banks face a
greater threat than their bigger bank
rivals, some of them have taken the
" de-risking " route: terminating certain
high-risk categories of customer
accounts, services or businesses to
avoid the AML risk by these accounts,
Stipano says.
" A BSA/AML risk assessment is
critical to establishing an effective
AML program, " he adds. " All institutions
should do a satisfactory risk
review. Once they have done that, the
bank is in a better position to understand
and mitigate its AML risk. "
Red flags
Understanding what constitutes potential
illicit activity can be a challenge.
From the acquiring bank perspective,
signs of trafficking or money laundering
by merchants include " multiple
payment vehicles within one website,
multiple encrypted or passwordprotected
website areas, foreign-based
hosting, and cryptocurrency connections
and acceptance vehicles, "
according to Darrel Anderson,
president of Conformance Technologies,
whose InConRadar monitors for
suspicious activity.
For example, Anderson's comCompliance
calendar
A quick look at upcoming regulatory changes
Jan. 1, 2018
Effective date for final rule implementing
changes to the Home
Mortgage Disclosure Act (HMDA)
April 1, 2018
Effective date for final rule implementing
requirements for prepaid
accounts (Regulation E)
April 1, 2018
Effective date for Mortgage
Servicing Amendment (Regulations
X and Z and FDCPA)
May 11, 2018
Effective date for customer due
diligence requirements (beneficial
owner rule)
July 1, 2018
Effective date for final rule amending
Regulation CC
For compliance deadlines
further into the future, you can
see ICBA's online regulatory
calendar at icba.org/compliance/
regulatory-calendar
______________
pany's solution might scan merchant
websites for suspicious words and,
if found, validate their use with the
registered merchant category code
specified during underwriting. For
example, he says, if the business is a
bar and grill, finding the terms " FDA "
and " bitcoin " on its website would
throw up a red flag, because there's
no legitimate reason for them to be
there. " These conditions, along with
thousands of others, trigger alerts,
which lets the bank know they need
to review a merchant and its business
practices, " he says.
Dan Stitt, director of financial
crime analysis for QuantaVerse, has
worked in federal law enforcement
and banking for more than two
decades. Over the years, he says, law
enforcement has seen " both great and
horrible compliance programs. "
" Typically, the smaller the bank,
the more interaction they have with
the customer, " Stitt says. But with
smaller budgets and staff in place,
" their systems are not as advanced.
And criminals can be pretty sophisticated. "
Some savvy money launderers
or criminal rings might also move
68 ICBA IndependentBanker November 2017
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Independent Banker - November 2017

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