BSA Software: Best Practices & Expectations
Author: Brian Shea
The Bank Secrecy Act (BSA), and associated Anti-Money Laundering (AML) laws, has heightened the pressure from regulators to have a system in place to detect and mitigate money laundering activities within the institution.
With BSA software in place, it may be tempting to assume your compliance requirement has been met, but simply using the software is not going to automatically solve your problems. As BSA software use increases, it is imperative that organizations understand the software is only one piece of the BSA program needed. Here are a few benefits, risks, and best practices that will help you on your way to BSA software compliance.
BSA Software: Benefits and Risks
Automated BSA software has a number of benefits for the institution’s BSA compliance program. It gives your institution the opportunity to more easily and completely identify suspicious activity, as well as streamline processes like risk ratings and due diligence. BSA software also reduces the use of manual logging and the subsequent data entry, which minimizes the opportunity for the mistakes that go hand in hand with human involvement. Lastly, it will provide more detailed records, ensuring nothing pertinent is left out of the reports.
As with any technology, there will also be risks. Examiners tend to hold institutions utilizing BSA software to a higher standard. There is also the potential increase in false positives if the software is not properly configured. Having too many false positives takes more time for the people who are reviewing alerts, and can become a resource burden on your institution. Increased costs for the licensing, training, and validation is another potential pitfall.
BSA Software Best Practices
BSA software is never going to be perfectly configured out of the box. Having too many false positives means wasting time checking irrelevant transactions. Conversely, having lax alert criteria offers the potential for real issues to pass unnoticed. It is integral to the success of the software that it be tailored to your specific institution. Your BSA risk assessment is a great tool to assist in establishing those parameters within the software to suit the transaction habits that make your institution unique.
It is also important to be reviewing reports and alerts generated by the software in a timely manner. If you find too much time is needed to review reports, it may be that the configuration is too conservative, leading to a large number of false positives.
Remember: your financial institution is ultimately responsible for BSA compliance. If you aren’t meeting regulatory requirements, you won’t be able to point to your vendor as the culprit. It’s your job to be sure you have everything in place. In this case, your BSA risk assessment will also be integral in keeping you focused on what you need, and how the BSA software will fit into your plan.
BSA Software Evaluation: What to Look For
Regulatory compliance:
Your software needs to play nicely with all the major players – BSA, AML, FinCEN, and OFAC. The regulatory landscape is always shifting, so make sure your solution can keep up with those changes.
Transaction monitoring:
This is where the rubber meets the road. You want a system that can spot suspicious activity in real-time or close to it. Think of it as your financial watchdog – it should be able to bark when something doesn’t look right, based on rules you can customize for different scenarios.
A holistic view of risk:
When it comes to sizing up customer risk, your software should be smart enough to look at the whole picture – where they’re located, what kinds of transactions they’re making, how active their accounts are. The best systems let you adjust these risk scores as you learn more about your customers.
Suspicious activity reports:
Now, let’s talk about SARs – nobody’s favorite paperwork. Good software takes the headache out of filing these reports. It should help you identify potential issues, keep track of deadlines, and make the filing process as painless as possible.
Know-Your-Customer:
KYC and customer due diligence features are essential, too. You need a robust system for collecting and verifying customer information, with extra muscle for handling high-risk clients that need enhanced due diligence.
Case management:
For your investigation team, case management tools are a game-changer. They need a central hub where they can track cases, collaborate with colleagues, store documents, and maintain detailed records of their work.
Analytics:
The analytics piece is huge. You want software that can crunch through mountains of transaction data to spot patterns and generate both regulatory and internal reports. Even better if it has AI and machine learning capabilities – these can catch subtle patterns that traditional rules might miss.
Integration:
Your BSA software needs to play well with your other banking systems. Think about API support too – it’ll make your life easier if you need to add new features down the road.
Training and support:
The best software in the world isn’t worth much if your team can’t use it effectively. Look for vendors that offer solid training resources and responsive support teams.
Growth & scalability:
You want a solution that can scale with your bank and adapt to new requirements. And of course, the price needs to make sense for your budget while delivering real value in terms of risk reduction and efficiency gains.
Get these elements right, and you’ll have a powerful tool for keeping your institution compliant and your operations running smoothly.
What aspects are you finding most challenging in your current setup?
Related Reading:
- The Role of Tech in Risk Management
- Understanding Your Bank’s Risk Profile
- 4 Best Practices for Your Next Risk Assessment