[vickieg]

We have an account that is less than a year old and its activity does not mirror anticipated activity. Within 3 months the tellers noticed almost daily cash deposits to cover paypal activity. Our BSA/AML Officer asked them to request new account relationship due diligence information. The customer “blew off” the request and reiterated that her payroll checks were funds for deposits and normal expenses would be coming out. The activity continued and we performed a SAR. Same activity continues and the Officer requests another account relationship due diligence information. This time the customer informs they are a “paid shopper” and this is the cash deposits and the purchases are the debit transaction with some personal expenses. The tellers proceed with a follow up SAR and the Officer submits another SAR. Our concern is money laundering and unsure of what to do next. We have contacted FinCEN, they have not provided any guidance. We are wondering can we close this account, should we close this account? The cash deposits are roughly $75,000 in 3 months. Also, in our research we know the paypal debits are transfer out of the account here into another account elsewhere. She is not making purchases on paypal. We have reached out to local law enforcement and they don’t have any open active investigations on this individual. Has anyone experienced this? We would appreciate any helpful suggestions on this.

Topic

[rcooper]

We have received your question and forwarded it to Don Blaine for his opinion. You should receive a response soon. Thanks for your patience!

My personal opinion is that you can close the account and perhaps you should (consider the risk level associated with the account). The FFIEC BSA/AML Exam Manual – SAR section state examiners will evaluate whether your policy, procedures, and processes include:
Documenting decisions not to file a SAR.
Escalating issues identified as the result of repeat SAR filings on accounts.
Considering closing accounts as a result of continuous suspicious activity.

Don may have additional information.

[donblaine]

Robin was spot on with her answer. Many examiners would answer your question of whether to close the accounts by saying: “It depends on your bank’s BSA risk profile”. I never found that too helpful or comforting when I was the BSA Officer at a bank but it gave me plenty of wiggle room when I was an examiner. It didn’t sound like FinCEN provided a magic bullet either.

The first issue (October 2000) of the SAR Activity Review Trends, and Issues provided the following guidance on page 27: The closure of a customer account as the result of the identification of suspicious activity is a determination for an organization to make in light of the information available to the organization. A filing of a SAR, on its own, should not be the basis for terminating a customer relationship. Rather, a determination should be made with the knowledge of the facts and circumstances giving rise to the SAR filing, as well as other available information that could tend to impact on such a decision. It may be advisable to include the organization’s counsel, as well as other senior staff, in such determinations.

Well, that didn’t help too much but the bottom line is that this customer is now on your High-Risk list and likely will continue to stay there because of their inability to cooperate with your due diligence efforts which might lower the perceived level of risk.

Somewhere in the BSA exam manual there is reference to banks having written procedures within their BSA Policy for the methodology the bank would use for closing accounts for continuing suspicious activity. If your BSA Policy doesn’t currently address your methodology for closure due to repeated SAR filings, then I suggest you add this language first, get the Board to approve it, and then take action to close the account. However, if you feel strongly about the issue and your BOD is BSA risk adverse, I can see where you might want to take action first (close the account) and not let the red tape of waiting for the next BOD meeting delay the process.

I was one of those examiners that liked to see processes (such as closure methodology) first laid out in writing in the policy followed by bank personnel acting upon the written policy rather than vice versa. In my discussions with bankers, I believe many would vote to close this account and provide a generic letter to the customer indicating that the account does not meet the bank’s standards and is being closed or perhaps the letter would simply state that the account was not maintained in a manner appropriate with the bank’s BSA risk profile. Unlike, Reg B and Adverse Action notices you don’t have to provide any specific reasons.

Not all SARs create equal risks for the bank and I hope your BSA Policy addresses a methodology on which SARs – e.g. terrorist financing, fraud, money laundering – are higher risk and deserve more scrutiny and are documented as higher risk.

First of all I would make sure that I have well documented closure procedures in my BSA Policy that address the risk rating of the SARs being filed for continuing activity. Your policy should state that such decisions are made on a case-by-case basis by the SAR or BSA Review team. The policy would address what documentation, such as a Continuing SAR Customer Closure form, is expected to be completed by BSA staff along with what comprehensive supporting documentation should be presented for review. I would bring key stakeholders into the discussion such as Deposit Ops and ensure the internal closure form is signed by all key departments or employees such as Deposit Ops, BSA Officer, Compliance Officer, etc. I would also make sure that any personnel which might speak with the soon-to-be disgruntled customer knew that any reference to a SAR was taboo.

Prior to the arrival of your examiner, document all discussions, issues, customer conversations, FinCEN and police contacts, etc. These will go a long way in meeting the expectations of your examiners.

Perhaps we have some members that might be willing to share sample language out of the letters they use when closing accounts for continuing SARs.

[Author]

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