Independent Banker - November 2017 - 69

from bank to bank, opening multiple
accounts to avoid detection.
While effective BSA/AML compliance
software options have been
available for many years, Stipano says
these generally effective solutions
often come with challenges, including
generating " a lot of false positives,
and requiring a lot of human monitoring.
This whole area is ripe for
disruptive technology, " he adds, ref " A
BSA/AML risk
assessment is critical
to establishing an
eff ective AML program.
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. "
-DANIEL P. STIPANO,
BUCKLEY SANDLER LLP
erencing the growing application of
machine learning, data analytics and
emerging artifi cial intelligence.
Sticking to the rules
Compliance is a key area to consider.
Community banks may be wary of
using tools and solutions that regulators
have not offi cially approved or
endorsed. " The consequences of getting
it wrong can be severe, " Stipano
says. " Enforcement actions have been
particularly harsh in the BSA area
over the past fi ve or six years.... These
cases capture headlines. "
Farmers Bank & Trust has hired
Computer Services, Inc. (CSI) for
several years to provide a monitoring
program and an annual review of the
community bank's BSA practices. Cook
says that the cost of CSI's monitoring
service represents less than 10 percent
of the bank's BSA budget, and its review
costs less than 5 percent of the budget.
While there is no regulatory
requirement that a fi nancial institution
obtain a BSA/AML automated
transaction-monitoring system,
Ledra Finley, risk and compliance
services manager for CSI, says there
are defi nite benefi ts. An automated
system uses analytics to help a fi nancial
institution identify customer
activity that does not fall within
" normal " activity for that customer.
It may also pinpoint suspicious
transaction-level activity based on
specifi c parameters.
Some challenges community banks
face in implementing and running
an effective BSA/AML program
include fi nding employees with the
skills and knowledge to develop and
maintain the program, and having
suffi cient fi nancial and personnel
resources devoted to management
of the program, she says. " It is also
important to implement a strong
compliance culture, " Finley adds,
" that starts with the board and senior
management. "
Once all staff members are on
board, Finley advises training
employees to watch for several
potential indicators of money laundering
(see sidebar). " The fi rst line of
Two red fl ags
Community banks' closer customer relationships can
help identify suspicious activity-if employees know what
to look for. Here are two warning signs.
1. Information that doesn't add up, whether it's multiple tax ID numbers,
sizeable transaction activity yet a slim resume, or insuffi cient information
about the business or its owners.
2. Unpredictable business activity. Unexpected transactions, or transactions
that seem out of character for a particular type of business, could
be a sign that something is afoot.
If employees spot these or other warning signs, they should fi le a
suspicious activity report (SAR) so the matter can be investigated further.
$1-$2
trillion
Estimated annual
money-laundering
transactions worldwide
defense at a fi nancial institution is the
employee, " she says. " 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 offi cer
for investigation. "
Karen Epper Hoffman is a fi nancial
writer in Washington state.
independentbanker.org
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Independent Banker - November 2017

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