Our Regulator has "requested" that we begin using NAICS (SIC) codes on all commercial deposit accounts. The reason for this request is that we need to readily identify and monitor high-risk accounts. However, the list of codes is in the thousands, and our platform staff does not have the time to go through them to find the right one for a particular business. Our fear is that, if forced to do this, they will just chose the first one they come to that sounds remotely reasonable, which will result in garbage information for BSA purposes.
Are any of you - particularly Metavante banks- using NAICS codes for your deposit accounts? If so, how are you doing it?
This is something we are required to do, so I would appreciate any ideas I can get on how to make this entire process more "user friendly".
Thanks,
BC

I don't have an answer, but a supplement. I know these codes are used to help determine concentrations of credit, but this is an additional use. On an IBAT (T=Texas) listserv this question as to use came up. I said it was not mandatory to my knowledge. But here is one response that came in late from an OCC person, "I checked with our supervisory office, and the answer is "yes" the codes are required. Sorry to have taken so long to respond, but I have been out of the office. L."

This surprised me. Does anyone have a cite or is this becoming a rule through common use?

Andy - FYI, our regulator said that they are going to be requiring this of ALL their banks. We have used these codes for a long time for credit, as you mentioned, but never on the deposit side. Because our regulator is the Fed, I would not be at all surprised to see this added to Reg H! However, as far as I know now, it is not a regulatory requirement as much as a safety and soundness (read BSA) concern.
BC

Sorry - the post above is me, I just can't seem to get logged on tonight!
Bear Collector

I can see a new future for consulting firms that will take your commercial account records and give you NAICS codes for them.

Here's one that seems to charge a reasonable fee for this service: NAICS codes

You can use a three digit code system and it works fine - for example all NAICS codes that start with 112 are "Animal Production" and 112310 is "Chicken and Egg Production" and 112330 is "Turkey Production". If the difference between Chicken and Turkey is important for your BSA/AML risk assessment, you use the 6 digit codes - if not, 3 digit codes work fine. And I do know a Metavante bank that uses 3 digit codes. There are less than 200 different 3 digit codes and it's much easier on your new accounts.

As an FYI, I haven't seen the services that Bonnie recommends but a similar service from a different company was about 50% accurate.

Send me a PM with your email address and I'll send you a NAICS spreadsheet that a Metavante Bank uses. I'm not sure if Metavante has a canned field for NAICS but if not, you can probably create a user defined field.

BTW, thanks Bonnie - I know a bank that paid way more to a different company to clean up their NAICS codes.

Ex Banker

Andy,
As noted, the codes are far too precise for the task and Banker X's suggestion is a very good one. However, I believe Bear's characterization is accurate..."required" does not mean mandated by regulation, only "mandated by unwritten regulatory policy" backed up by the safety and soundness characterization.

So far, I have not seen the recommendation made to a bank that does not have the current EDP capability. In other words, if they see your operating system will support it, they say you should do it. If your system does not support it, they do not make a recommendation that would require you to change systems.

By analogy, if your car has seat belts they tell you to wear them. However, if it doesn't, they won't tell you to buy a new car.

Bear Collector - what an interesting thread - we are a Kirchman shop and use the NAICS codes heavily for the credit side of the bank, concentrations of credit, etc. They are assigned by the commercial lending administrative staff when a new loan is loaded. We really wish it were a pull down menu, but as Ken said since SIC became NAICS the list is way too long, and our vendor does not have this. We also considered trying to use them for the high risk accounts - this may happen long term, because in those cases where the relationship is strictly deposit the code would have to be assigned somehow. We had some lively discussions on this. I know our examiners like them on the loan side. Please keep us posted if this becomes more than an examiner wish list, or PM me.