Premium Products / Personal Service

Customer Risk Analysis

Automated Risk Analysis

The biggest question for all financial institutions is “When does a customer become high risk?”

  • The answer prior to May 11, 2018 was “Whenever transaction amounts cause the financial institution to be concerned.”

  • On May 11, 2018 the Beneficial Ownership Rules went into effect and the answer changed to “Whenever a customer has transaction amounts that are significantly different than the financial institution expects.” Let us give you an example.

    • A liquor store customer located close to a beach had $170,000 in  cash deposits in June of 2020. If the customer had cash deposits of $150,000 in June of 2019, his 2020 activity probably isn’t suspicious (because the increase is only 13%).

    • A hamburger stand next door to the liquor store had $50,000 in cash deposits in June of 2020. If the customer had cash deposits of $30,000 in June of 2019, his 2020 activity should be closely looked at for other suspicious activity (because his cash transactions increased 66%).

    • Even though both customers increased their cash deposits by $20,000, it’s the extent to which an increase is unexpected that makes a customer high risk.

So, bottom line: you have to know what a customer is expected to do, before you can identify those who have unexpected variances. Under the 2018 rules, a customer is no longer considered high risk simply because they have large transactions. 

Our automated risk analysis strategy uses historical data and transaction-averaging to calculate anticipated activity. A customer is identified as high risk when their activity is significantly higher than we expect.

  • Every month, we calculate customer baselines using data from the same period in the prior year.

    • Every commercial account and every large personal account will have up to 21 calculated baselines.

    • Our baselines include such things as monthly cash deposits, monthly cash withdrawals, monthly incoming and outgoing ACH debits, monthly incoming and outgoing ACH credits. incoming wires, outgoing wires, total debits, total credits, and more.

  • Once we create the baselines, we review all customers that have significant activity. The regulators refer to this step as “The Transaction-Trigger Review.”

    • Our Trigger Reports identify all customers that have significant activity (for example, monthly cash deposits of $25,000 for commercial customers, and $5,000 for personal customers).

    • We have a total of 12 Trigger Reports (six for commercial and six for personal).

    • A customer that’s on the Trigger Report will have all of their transaction activity reviewed, for the past six months.

    • We not only alert you to customers that have unusual activity this month, we also alert you to customers whose activity has been unusual for the past six months.

    • The greater the degree of unexpected activity, the higher the risk rating.

    • Trigger thresholds are customizable for consumer versus commercial customers.

And best of all, we show you the figures used to discern unusual activity and identify high risk customers.

  • Our algorithms use simple averages and you’ll know for sure why a customer has the risk rating they do.

  • You won’t need an independent third-party to test your parms.

  • You won’t have to pay for a third party to confirm proprietary algorithms.

Bottom line: we make BSA risk management easy and affordable.

Automated risk analysis is available in all Wayne Barnett Software monitoring products. Find out which products are best for you.