In the exam manual it requires procedures for considering closing accounts for continous suspicious activity.

At a recent conference the speaker covering BSA said that regulators expect banks to 'shut these accounts down'- with some exceptions.

In my networking with other BSA folks, I've found that most are simply closing accounts once they see suspicious activity and filing a SAR. They are telling the customer that 'we no longer wish to do business with you'.

I am struggling with how to draw that line, as to when to close and what to tell them - obviously I would not disclose a SAR filing. The customer is often coming back with questions. Does anyone have a simple yet practical approach to this that they'd be willing to share? Is, 'sorry, but we're closing you out' truly the standard banks are using?

I would be very careful about a "no tolerance" policy for closing accounts where a SAR has been filed. Suppose you have a consumer account that deposits $5,000 in cash and then a week later deposits $6,000 in cash, and you file a SAR for structuring because if you don't, you'll catch holy heck from your auditors and examiners.

Do we, as an industry, really want to be going down that route? It's bad enough that we file a SAR if we even sniff the slightest hint of impropriety. I can only imagine the nightmare that will be in store for consumers and mom&pop businesses that find they can't find a reliable bank account in order to keep their financial house in order.

I think the better approach would be to "risk rate" your SARS and close the accounts where you feel the risk of illegal or fraudulent activity is high enough to harm the bank.

Hence a risk based approach. Imagine that

All joking aside, PR said it perfectly. There is a big difference between SAR filings.

Customer A is running a legitimate business, paying his taxes, has good balances and a loan relationship, is doing everything right, except for structuring his deposits because his CPA told him about the big, bad bank reporting all customers who deposit or withdrawal more than $10M in cash.

Customer B is a convenience store who offers money transmission services, isn't registered with FinCEN, is depositing more cash than can be expected given his size and location and refuses to return calls when asked to provide more information.

You cannot tell me that the risk level for both customers is the same and both accounts warrant closure. To steal a line from a frequent poster on these very boards, ask your self these two questions: Is the relationship profitable? Is their legitimate risk presented by maintaining the relationship?

Would be nice if examiners could take that same approach. I do so hate the substitution of sledgehammers for fly-swatters.

Are you implying that examiners don't use risk based approached... I think they do, I just think they don't always understand that just because bank X says its a risk, bank Y doesn't have to agree.

I'm always conflicted about what to do with these frequent filer customers... re-file, re-file, no re-file (must be on vacation), oh re-file (technically a new original file) again during a policy mandated review...

I try and do what ACBank suggests and look at it from that S&S risk perspective, but sometimes I just get aggravated dealing with the same filing over and over and over... and at what point do I have the right to just say FORGET this non-sense??? Even if I don't think the risk is that big of a deal...

I always take the view that is a customer is wasting the bank's time and money despite the possible low risk of the suspect activity, the bank has the right to tell them to conduct their activity elsewhere. I know some think this ongoing followup and filing takes minimal time; that is not my experience.

If you are spending too much time monitoring an account to file continuing SARS, then it is likely that the account is no longer profitable to the Bank. If that is the case, then you have a business justification to close the account.

Also, in answer to one of the questions posed by the OP, yes - most Banks use the "sorry, but we're closing you out" type of letter. They might further say something along the lines of "The account has not been maintained in a satisfactory manner." While it sounds horribly generic, the issue you face is you want to avoid implying you have suspicions as this may be seen as a possible disclosure that a SAR has been filed. Also, you don't want to anything too specific in a letter that could be used against you.

Account closure = there is a risk of loss to the bank or the account is not profitable (including the costs of the additional monitoring). This applies whether this is the first or hundredth SAR. There is no other formula.

There. A short and simply policy statement!

It has been my experience that the key to avoid regulatory criticism is to have well-documented closure procedures (referenced in your BSA/AML policy) and consistency in application. Obviously, you have to leave yourself some wiggle room for instances where you have certain relationship (lending, etc.); however, those aren't the ones that tend to be questioned. The questions generally arise when several SARs and relationships appear to be the same but the bank's response varies. Document all findings/decisions well, including those regarding account closure, to enable you to intelligently discuss why one account is closed but another that appears similar is allowed to remain open.