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Account Monitoring January 7, 2004 Jay Repine FRB - Atlanta, Miami Branch.

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Presentation on theme: "Account Monitoring January 7, 2004 Jay Repine FRB - Atlanta, Miami Branch."— Presentation transcript:

1 Account Monitoring January 7, 2004 Jay Repine FRB - Atlanta, Miami Branch

2 Today’s Session zRisks zThe Basics zTypical Problems zBetter Practices zOther Monitoring Issues

3 Overview zIntegral part of effective AML program zUSA PATRIOT Act and SAR requirements reinforce zMonitoring serves as safety net (EDD) zIndustry trends clearly towards automation zOne size does not fit all

4 Risks zReputational zLegal ySAR reporting requirements zOperational zFinancial repercussions

5 Examinations - Onsite zReview policies and procedures zReview and document the account monitoring process zReview effectiveness of monitoring process systems and exception reports zTest process and review adequacy of responses and SAR filing process zDetermine if monitoring is in audit scope

6 Monitoring Procedures zOutline responsibilities in monitoring process zOutline process for establishing profiles/parameters for account monitoring zTypes of reports that will be used and frequency generated zResponse timeframes zFollow-up/escalation process, if warranted zProcedures for filing SARs

7 Account Monitoring zShould cover all flows of funds into and out of customer accounts zCover all business lines zMonitoring should be commensurate with size and risk profile of bank zIndependence of monitoring group zAutomated systems can be well suited for account monitoring

8 Automated Account Monitoring - “Not a Panacea” z Can be effective tools but … yUp front investment of time and money yFine tuning process yStill requires human intervention and judgement yChallenges often underestimated

9 Automated Account Monitoring Systems (AAMS) zVariety of approaches yComparison to profiles (customer or type of account) yTransactions over specified $ amount yTransactions with laundering characteristics yScoring system yIdentify transactions with NCCTs or other high risk jurisdictions zFederal Reserve does not endorse systems yChicago project

10 Automated Account Monitoring Systems zCommon Problems yData integrity (are all accounts/transactions being captured) yUnmanageable exception reports xCluttered with “noise” xLower risk exceptions/accounts on reports yProfiles xNot validated (historical info used) xDefault profiles xException variances yLack of timely responses to inquiries yInsufficient explanations of activity x“is it reasonable and does it make sense”

11 Automated Account Monitoring Systems zEffective Systems and Processes yWell documented yIdentify true exceptions yHighly involved compliance department xReview EDD/CDD up front xServe as clearing house for explanations (central repository) x“Watch lists”/KYC Committee– better practice yRisk segmentation (PEPs, high risk clients)

12 Automated Account Monitoring Systems zEffective Systems and Processes (cont.) yTiered approval process for profiles xUpfront risk yControls over re-profiling process yManageable and effective exception reports xUse a number of different reports ySenior management commitment

13 Automated Account Monitoring Systems zEmerging Methodology – One size does not fit all yApplicable to Correspondent Banks, MSBs, other high volume wire transfer clients zAggregation of Wire Transfers y12-18 months ySorts -- Originators, Beneficiaries, Amounts yAll wires vs. account wire activity

14 Aggregation Example

15 Other Monitoring Issues zCash Letters zHead Office Checks z“Concentration Accounts” zDraft AAMS procedures

16 Questions???


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