Case Study: Regional Bank With Limited Resources Satisfies Deficiencies in Its AML Program

Learn how a multi-million-dollar U.S. retail bank with several branches that was non-compliant with regulatory controls was repositioned for success with the help of Withum’s BSA/AML (Bank Secrecy Act/Anti-Money Laundering) team.

Executive Summary

For its annual anti-money laundering (AML) program and operational review, a banking regulator found a commercial retail bank’s AML programs, including Know Your Customer (KYC) profiles of high-risk customers, transactional monitoring software and its AML policies and procedures, were strongly deficient. The bank needed to fix this before the examiner returned in a year’s time. They called on Withum to assess the deficiencies and remediate the identified problems before their next regulatory review.

The Client

The U.S. retail commercial bank has $600 million in assets with multiple branches providing financing and banking services to individuals and businesses. Their business model strives to help customers fulfill their objectives and be successful while also serving their local communities.

The Challenge

While serving its customers, the bank found itself needing more staffing and adequate resources to keep its AML programs up to date. Failure to satisfy these requirements would result in fines, the halting of business and theoretically the closing of the bank.

They particularly needed assistance with KYC profiles and transaction monitoring processes to ensure that all operations were current and accurate. The bank did not have the proper staffing or necessary skillset to do so.

They had purchased an AML risk mitigation system to address its Know Your Customer, Transaction Monitoring and Surveillance programs, but needed Withum’s subject matter expertise to optimize and modify the tool for the bank’s unique customer and risk signature. An untuned system could lead to the bank’s compliance group’s inability to identify and mitigate risks, resulting in missed opportunities and unsatisfactory regulatory examinations.

The Approach and Solution

With decades of expertise in this area, Withum assessed the regulatory demand letter and presented a step-by-step plan proposal for the bank. The BSA/AML team provided the project scope and budget to deliver fulfillment services from three specific areas of regulator-identified deficiency:

  • Optimization of the bank’s system used to monitor and manage its customer risk and overall Know Your Customer program, to provide an accurate system and tool to meet regulatory KYC requirements while properly identifying the number of high-risk customers
  • Administration of Transaction Monitoring experts to perform a six-month optimization assessment and testing project
  • Remediation of the bank’s KYC high-risk review backlog with experienced AML analysts

The Results, ROI

With the optimized system enabled to measure the true risk of each customer relationship, the bank could better define the total universe of its riskiest customer for the Enhanced Due Diligence process and bank additional customer types based on the new risk methodology. This assisted management by identifying the compliance cost needed to address current business risk mitigation and expand business by using compliance tools and risk methodologies. Working with a single firm, such as Withum, resulted in an efficient and cost-effective way to address the multiple needs of the bank’s compliance program.

With Withum’s help, the bank is now more confident to undergo its regulator follow-up that previously identified deficiencies. The shortcomings have now been remediated with extra efforts taken to address all issues. A significant key to responsible business growth is a well-functioning AML risk compliance program, which Withum’s BSA/AML team was able to enhance for this bank.

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