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While Awaiting Finance Reform, Evans Bank Automates BSA Compliance

Using software to automatically identify suspicious transactions, scan checks at the teller line and improve overall branch efficiency.

Like most community bankers, Howard Martin, senior vice president and CIO of Evans Bank ($516 million in assets) in Hamburg, N.Y. (which is in western New York, past the Finger Lakes, right near Lake Erie), anxiously awaits the finance reform bill being finalized in Congress. "Our management has had quite a bit of discussion around the pending legislation, and a lot of the bankers I interact with are sitting and waiting [for the outcome]," he says. Martin and his colleagues are in agreement with the Too Big to Fail provisions of the bill. "It's appropriate, some of the larger banks were bailed out, while community banks are failing." He worries, though, about the unintended consequences of some of the proposals. For instance, if large institutions are allowed to "self-fund failure at a rate that's cheaper than the risk they would otherwise be taking on, that sounds counter-productive," he says.

But meanwhile, as a reconciliation committee makes the final changes to the bill before taking it to a vote, Martin reports that his bank has recently automated an older, but still relevant, piece of legislation: the Bank Secrecy Act.

Although this act, intended to thwart money laundering by having banks report large and suspicious cash transactions, was passed in 1970, it can still be a cause of concern at a small bank like Evans. "Some of the biggest burdens we encounter are things like BSA," Martin says. As the bank has grown to its current 13 branches, the task of tracking customer transactions across the bank, identifying when a customer or people holding joint accounts have conducted cash transactions that in the aggregate exceed a certain amount, has gotten more difficult (for Evans Bank the threshold is $3,000).

In the past, the bank automated what it could. Tellers and branch staff would try to identify suspicious or large transactions and some back office analysis took place to try to look at all the activity in an aggregated way. "What was difficult was aggregating transactions from disparate sources, to see if they met the threshold for subsequent analysis," Martin says.

At the same time, the bank wanted to automate its teller lines. Martin came across a company called Benchmark Technology Group that had a suite of products — BSA Navigator, STeller and Proof 21 — that could provide teller and BSA automation at once. A teller capture module images items as they come across the teller line, a teller automation piece reconciles and balances transactions and creates transaction files for submission to the back office, the BSA Navigator automates BSA compliance.

To implement the new system, the bank upgraded all its teller windows with a standard PC , a check scanner and a receipt printer. It installed server hardware and printers in the back office as well. The teller software required some integration with Evans Banks' back office, a process that took about seven months. But with all of that in place, the BSA piece fit in easily and implementation took about 90 days, Martin says, with the final branch live on the system November 1, 2009.

Regulators who visited the bank at the end of last year had no BSA issues, as far as Martin knows. (Sometimes the biggest compliment is silence.)

The software has made internal audits easier and saved branch and back office staff the time of trying to identify and report on affected transactions. "Because of the fact that tellers can now file a customer transaction record while the customer is standing in front of them, we know we're saving a lot of time in total," Martin says. "In the past, they would have to set aside time and manually type out a form, and on the back side those forms were triple checked for accuracy. Now if it's an existing customer most of the fields are profiled."

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