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Account Monitoring

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Account Monitoring. January 7, 2004. Jay Repine. FRB - Atlanta, Miami Branch. Today's Session ... Monitoring serves as safety net (EDD) Industry trends clearly ... – PowerPoint PPT presentation

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Title: Account Monitoring


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

2
Todays Session
  • Risks
  • The Basics
  • Typical Problems
  • Better Practices
  • Other Monitoring Issues

3
Overview
  • Integral part of effective AML program
  • USA PATRIOT Act and SAR requirements reinforce
  • Monitoring serves as safety net (EDD)
  • Industry trends clearly towards automation
  • One size does not fit all

4
Risks
  • Reputational
  • Legal
  • SAR reporting requirements
  • Operational
  • Financial repercussions

5
Examinations - Onsite
  • Review policies and procedures
  • Review and document the account monitoring
    process
  • Review effectiveness of monitoring process
    systems and exception reports
  • Test process and review adequacy of responses and
    SAR filing process
  • Determine if monitoring is in audit scope

6
Monitoring Procedures
  • Outline responsibilities in monitoring process
  • Outline process for establishing
    profiles/parameters for account monitoring
  • Types of reports that will be used and frequency
    generated
  • Response timeframes
  • Follow-up/escalation process, if warranted
  • Procedures for filing SARs

7
Account Monitoring
  • Should cover all flows of funds into and out of
    customer accounts
  • Cover all business lines
  • Monitoring should be commensurate with size and
    risk profile of bank
  • Independence of monitoring group
  • Automated systems can be well suited for account
    monitoring

8
Automated Account Monitoring - Not a Panacea
  • Can be effective tools but
  • Up front investment of time and money
  • Fine tuning process
  • Still requires human intervention and judgement
  • Challenges often underestimated

9
Automated Account Monitoring Systems (AAMS)
  • Variety of approaches
  • Comparison to profiles (customer or type of
    account)
  • Transactions over specified amount
  • Transactions with laundering characteristics
  • Scoring system
  • Identify transactions with NCCTs or other high
    risk jurisdictions
  • Federal Reserve does not endorse systems
  • Chicago project

10
Automated Account Monitoring Systems
  • Common Problems
  • Data integrity (are all accounts/transactions
    being captured)
  • Unmanageable exception reports
  • Cluttered with noise
  • Lower risk exceptions/accounts on reports
  • Profiles
  • Not validated (historical info used)
  • Default profiles
  • Exception variances
  • Lack of timely responses to inquiries
  • Insufficient explanations of activity
  • is it reasonable and does it make sense

11
Automated Account Monitoring Systems
  • Effective Systems and Processes
  • Well documented
  • Identify true exceptions
  • Highly involved compliance department
  • Review EDD/CDD up front
  • Serve as clearing house for explanations (central
    repository)
  • Watch lists/KYC Committee better practice
  • Risk segmentation (PEPs, high risk clients)

12
Automated Account Monitoring Systems
  • Effective Systems and Processes (cont.)
  • Tiered approval process for profiles
  • Upfront risk
  • Controls over re-profiling process
  • Manageable and effective exception reports
  • Use a number of different reports
  • Senior management commitment

13
Automated Account Monitoring Systems
  • Emerging Methodology One size does not fit all
  • Applicable to Correspondent Banks, MSBs, other
    high volume wire transfer clients
  • Aggregation of Wire Transfers
  • 12-18 months
  • Sorts -- Originators, Beneficiaries, Amounts
  • All wires vs. account wire activity

14
Aggregation Example
15
Other Monitoring Issues
  • Cash Letters
  • Head Office Checks
  • Concentration Accounts
  • Draft AAMS procedures

16
Questions???
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