Capping BSA Alerts

Capping BSA Alerts Based On Your Staff Can Result In Violations

Most every BSA Officer (and their staff) at one time or another has struggled with what seemed like an insurmountable number of alerts, all of which must be investigated in a timely manner.  Not only is timeliness expected, but also quality investigations and an internal quality assurance program. This can all equate to several man hours, regardless of the size and risk profile of your institution. 

On February 15, 2018, FinCEN issued a $185 million civil money penalty (CMP) against U.S. Bank for “willfully violating the Bank Secrecy Act”.  One of the primary violations uncovered was that “U.S. Bank chose to manipulate their AML software to cap the number of suspicious activity alerts, rather than increasing staffing to comply with anti-money laundering laws in a timely manner.”

As BSA professionals know, the FFIEC Exam Manual states that “suspicious activity reporting forms the cornerstone of the BSA reporting system. It is critical to the United States’ ability to utilize financial information to combat terrorism, terrorist financing, money laundering, and other financial crimes.”  Now THAT is a strong statement.  It is also an indication that all financial institutions’ suspicious activity programs will be carefully scrutinized by regulators during an exam, and any deficiencies will be serious. This means that just because you may be short staffed, you should not determine how many alerts should generate based on the staffing number your budget allows.  Remember, regulators care nothing about your institution’s budget when it comes to compliance. 

TIP: It might be a good idea to share a copy of U.S. Bank’s assessment with your executive team and board if you do not currently have a top down approach to compliance. It also might help you get the tools and resources you need when budget time rolls around.

Staffing requirements to ensure a strong BSA program can be costly. Therefore, it is crucial that the number of false positive alerts you are receiving are minimized. Your AML monitoring system should be optimized on a risk based approach and reviewed on a periodic basis.  This means each parameter setting must be set based on a documented methodology, with appropriate testing, to ensure suspicious activity is not missed. 

We all realize that it is not possible to detect every single bad actor at each illicit transaction. However, most activity that is  suspicious should be alerting during transaction monitoring. Some false positive alerts ensure that the settings are appropriate for detecting suspicious activity (but not excessive), and that you most likely are capturing what you need.  If you are receiving excessive false positive alerts, you will want to make sure your system is tuned to the appropriate settings. 

If you are unable to staff appropriately on a short term basis (i.e. seasonality such as tax season, employee leave of absence, etc.), consider outsourcing alert and/or case monitoring to ensure your institution remains complaint. Inadequate staffing is seen more frequently in regulatory content orders than most people would expect. The rear view mirror is usually a much clearer image, and in this case adding additional staff members would have been much less costly than the $185 million CMP U.S. Bank now faces. Not to mention risking your institution’s reputation.  Additionally, the fact that U.S. Bank, according to FinCEN, “failed in its duty to protect our financial system against money laundering and provide law enforcement with valuable information” is a violation of the core of BSA.

The bottom line is, you don’t want to be the next institution with a CMP stating that you “…systemically and continually devoted an inadequate amount of resources to its AML program.”  Have a staffing assessment performed, staff appropriately (even if outsourced staff augmentation is needed) and ensure that your AML software is optimized for efficiencies.  By doing these things, you will have a better chance of being successful in your next BSA examination. 


If you are short staffed and are looking for some relief, Banker’s Toolbox has a CAMS certified team members who will work with you to ensure your BSA program’s health stays strong.  Learn more about the services we offer or contact an expert today.