Removing Customer from Exemption Status-High Risk

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Question:

We are being told by our internal auditors that a customer in which we have CTR exempted should be removed from exemption status due to negative information that they found regarding the customer that they found on an Internet search that dates back to 2000. When we performed our due diligence to exempt the customer last year we performed our due diligence and maintained records in accordance with FFIEC BSA/AML CTR exemption guidelines. There were no abnormalities noted at that time. The reasoning our auditors are referencing is that this customer poses a higher risk and should be removed as "Best Practices". Has anyone every experienced this?

Answer:

With some auditors, personal opinion supplants advice based on regulatory requirements and guidelines. If the internal auditors have presented this as a "best practice" recommendation, management can choose to just ignore their recommendation. Without additional details regarding the specific customer, this is going to be left to management to decide on how seriously they wish to treat this "recommendation". There is no basis in the exemption regulation or guidelines that presents "risk" as a qualifier or disqualifier for exemption purposes.

First published on BankersOnline.com 6/11/12