Answer:
Answer by Richard Insley
The BSA exemption rules specify that the "… bank shall establish and maintain a monitoring system that is reasonably designed to detect, for each account of a nonlisted business or payroll customer, those transactions in currency involving such account that would require a bank to file a suspicious transaction report." Unless account statements list cash transactions separately, this method would not appear adequate. The frequency and timing of reviews can vary, but the "monitoring" that's required is for the purpose of detecting and reporting suspicious activity. Your regulator and law enforcement agencies will take a dim view of SARs filed as much as a year after the suspicious activity occurred. The purpose of this rule is to assure that "exempt" customers do not escape the same monitoring and potential SAR filings as other customers.
Answer:
Answer by Linda Westfall
There are two separate issues to address regarding monitoring for Phase II exemptions.
First, at least annually, the bank must verify that the exempt person retains its status. This means the bank must conduct and document a review of each required element of the entity's eligibility. For a nonlisted business this would include a review of account activity to ensure the entity frequently conducts otherwise reportable transactions. A good guideline would be to review three month's activity in the account. The bank can set their own definition of "frequent"; however, if the account hasless than 8 reportable transactions in a year they should consider revoking the exemption.
Second, the bank must monitor the account for suspicious activity. This can be accomplished in a number of ways. There are several reports available in most banks that are useful for this purpose including: Significant Change in Balance Report, Kiting Report, Large Transaction Report, Uncollected Funds Report, Overdraft Reports, and Cash Aggregation Report. These reports are commonly reviewed by different bank personnel for other purposes, and can be forwarded to the BSA Officer for review for suspicious activity.
First published on BankersOnline.com 5/07/01
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