Can we advise a possible customer (account has not been opened yet) that, because of "red flag" statements he made to our CSR, we will possibly need to risk rate his account as "high"? He wants to open an account for a new oil & gas venture LLC. He has admitted the following: His wife works in the Investment Department of another area bank; he has accounts in other banks in town; he "named dropped" several personnel of other local banks he knows "personally"; and, after living out of the country for several years, he still has "offshore" accounts.

My hope is that if he has something to hide and advising him that we could possibly have to risk rate his account as "high" due to his statements, he will not open an account. On the other hand, if he has nothing to hide, he will not mind the additional scrutiny. Or should we just tell him that we do not wish to handle his account, and bye-bye. And, by the way, this is not discriminatory as we would handle every situation of this nature the same.

If you truly believe this to be a high-risk opportunity based on the comments your applicant made about the purpose and anticipated use of the account, the sensible decision would be to decline the account altogether.

Accepting the risk, and telling the customer about where he scores on your risk rating scale, invites uncomfortable conversations with your customer now, and your examiners later.

That is what I was concerned about. I know we can decline opening the account as long as it is not for a discriminatory reason; however, I was just not sure how we would explain to him that we did not want his account. We may just go ahead and open it, closely monitoring it for a few weeks and see what, if anything, happens.

Thanks for the reply.

How you explain it to the customer really depends on what he told you. If there are specifics about the account usage/purpose that are outside of the scope of what you allow and/or are equipped to handle, then you'll want to hang your response on those statements.

Our response is a pretty generic, "We appreciate your interest in doing business with us; however, the bank has made the decision no to enter this deposit account relationship."

If they press further, we will say, "The bank has various risk factors it analyzes in determining whether to open account relationships, and the bank has decided not to enter the relationship after considering those factors."