BSA/AML Manual

APPENDIX O: EXAMINER TOOLS FOR TRANSACTION TESTING

Currency Transaction Reporting and Suspicious Activity Reporting

If the bank does not have preset filtering reports for currency transaction reporting and the identification of suspicious currency transactions, the examiner should consider requesting a custom report. For example, a report could be generated with the following criteria: currency transactions of $7,000 or higher (in and out) for the preceding period (to be determined by the examiner) before the date of examination. The time period covered and the transaction amounts may be adjusted as determined by the examiner. The report should also capture:

• The customer information file (CIF) number, if available, or Social Security number (SSN)/taxpayer identification number (TIN).
• The date, amount, and account number of each transaction.
• The teller and branch or other applicable identifying information.

This data should be prepared in an electronic spreadsheet or database format to facilitate the sorting of the data. The data can be sorted in a number of different criteria (e.g., by branch, by teller, by SSN/TIN, or CIF number, if available). Analysis of this information should enable the examiner to determine whether CTRs and SARs have been appropriately filed.

Funds Transfer Monitoring

If the bank does not have preset filtering reports for funds transfer recordkeeping and the identification of suspicious transactions, the examiner should consider requesting a custom report. The examiner may consider requesting that the bank provide a report from its funds transfer systems that identifies all funds transfers (in and out) for a time period determined by the examiner. The report should also capture:

• The customer’s full name, country of residence, SSN/TIN, and BSA/AML risk rating, if applicable.
• The date, amount, transaction type, and account number of each transaction.
• The originator’s name, country, financial institution, and account number.
• The beneficiary’s name, country, financial institution, and account number.

The bank should provide a list of bank internal codes necessary to fully identify the account type, BSA/AML risk rating, country, transaction type, bank number, account number, and any other codes on the electronic reports. The list should be sorted to identify those accounts that do not contain sufficient originator or beneficiary information. Missing information may indicate funds transfer monitoring deficiencies. A large number of transfers or those of high-dollar amounts to and from higher-risk jurisdictions or involving parties that do not appear likely to be involved in such transactions may indicate the need for additional scrutiny.

Adequacy of Deposit Account Information and Trust and Asset Management Account Information

This test is designed to ensure that the bank is in compliance with the CIP regulatory requirements and to test the adequacy of the bank’s CDD policies, procedures, and processes.

The examiner should request an electronic list (spreadsheet or database) of all deposit accounts and trust/asset management accounts as of the date of examination. The balances should be reconciled to the general ledger. The report should also capture:

• The customer’s full name, date of birth, address, country of residence, SSN/TIN, and BSA/AML risk rating, if applicable.
• The date the account was opened.
• The average daily balance (during the review period) and balance of the account as of the examination date.

The bank should provide a list of bank internal codes necessary to fully identify the account type, BSA/AML risk rating, country, transaction type, branch number, teller number, and any other codes found on the electronic reports. The list should be sorted to identify those accounts that do not contain sufficient information.

Testing of Currency-Shipment Logs for Unusual Activity

Review all, or a sample, of the bank’s currency-shipment logs for significant aberrations or unusual patterns of currency-shipment activity. Examiners may also consider reviewing the FDIC Summary of Deposits (SOD) data for unusual trends in branch deposit growth.

Assess whether shipment levels and the frequency of shipments appear commensurate with the expected bank and branch activity levels. This assessment should include transactions to and from the central currency vault and the branches. Unusual activity warranting further research may include significant exchanges of small-denomination bills for large-denomination bills and significant requests for large bills.

Nonresident Aliens and Foreign Individuals

An effective method to identify and review the level of the bank’s nonresident aliens (NRA), foreign individuals, and offshore corporations is by obtaining MIS reports that provide no TINs or accountholders with individual taxpayer identification numbers (ITIN). The report should capture:

• Customer’s full name, date of birth, address, country of residence, and SSN/TIN.
• Date the account was opened.
• Average daily balance and balance of the account as of the examination date.

This data should be prepared in an electronic spreadsheet or database format to facilitate the sorting of the data. The bank should provide a list of bank internal codes necessary to fully identify the information on the spreadsheet. This information can be used to assess whether the amount of NRAs and foreign individuals provide heightened risk to the bank by determining the aggregate average daily balance, the account types, and countries in which the bank is exposed.

Funds Flow Reports

Examiners can review this information to identify customers with a high velocity of funds flow and those with unusual activity. A velocity of funds report reflects the total debits and credits flowing through a particular account over a specific period (e.g., 30 days). The electronic reports should capture:

• Name of customer.
• Account number.
• Date of transaction.
• Dollar amount of payments (debits).
• Dollar amount of receipts (credits).
• Average balance of the account.
• Type of account.

This data should be prepared in an electronic spreadsheet or database format to facilitate the sorting of the data. This report can be used to identify customer accounts with substantial funds flow relative to other accounts.