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. The baselines include the percentage change from the same month of the prior year.

    • Our baselines include such things as cash-ins and outs, ACH transactions, IATs, wires, total total transactions 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.”

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

  • 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.