Presented to the Conference of State Bank Supervisors and Institute of International Bankers

1. KNOW YOUR CUSTOMER ISSUES (“KYC”) Presented to the Conference of State Bank Supervisors and Institute of International Bankers U.S. Regulatory Compliance Orientation Program By: Walter J. Mix III, Managing Director The Secura Group, an LECG Company 550 S. Hope Street Suite 1645 Los Angeles, CA 90071 Tel: (213) 629-3500 Fax: (213) 629- 7420 Email: wmix@securagroup.com Website: www.securagroup.com July 16, 2007

2. Summary of Presentation on KYC Issues • Banks must have a complete program / full implementation. • KYC – how to get started • Assess the bank’s BSA/AML risk exposure • Customer due diligence (“CDD”) • Develop a risk rating matrix • KYC Monitoring wmix@securagroup.com www.securagroup.com

3. Banks must have a Fully Integrated/Implemented KYC Program • Enterprise Level • Policies and Procedures • Risk Assessment • Sufficient Staffing • Technology/Software • Training • Audit/Testing • Surrounding documentation – Important ! • Continuously Assess • “Proof is in the pudding” wmix@securagroup.com www.securagroup.com

4. Know Your Customer Issues (“KYC”) Getting Started • Involve the Board, management, operations, lines of business, branches, legal, information technology, and others • Must be a “team effort” that is enterprise-wide and integrates system capabilities, regulatory compliance and customer activity • Must have “buy-in” from the Board, Senior Management and lines of business/departments wmix@securagroup.com www.securagroup.com

5. Know Your Customer Issues – Risk Profile Assess the bank’s BSA risk exposure • Examination Guidelines Emphasize Self-Assessments • Guidelines assume thorough, effective risk assessments for all products/services, markets, customer types and lines of business • Document support for the risk assessment • Failure to conduct an appropriate risk assessment requires the examiners to perform the assessment wmix@securagroup.com www.securagroup.com

6. Know Your Customer Issues – Risk Profile Assess the bank’s BSA risk exposure (continued) • Market and geography of the bank’s services • Products and services the bank offers • Electronic banking, ACH originations, international wire transfers, trade finance, transactions with high risk countries, private banking • Significant number of high risk businesses such as import/export companies and check cashers wmix@securagroup.com www.securagroup.com

7. Know Your Customer Issues – CDD Customer Due Diligence (“CDD”) – Risk Rate Customers • Consider activities as well as customer’s history • Consider cash usage (deposits/withdrawals) • Consider volume of international wires • Consider transactions to/from high risk countries • Consider non-resident alien accounts - especially with significant volume of activity wmix@securagroup.com www.securagroup.com

8. Know Your Customer Issues – CDD (cont.) Develop a risk rating matrix • List the defined high risk customer types • Develop a rating methodology and assign risk ratings such as: • High, Medium, Low • 1-10 • 1-5 • Determine the frequency of monitoring for each risk rating category wmix@securagroup.com www.securagroup.com

9. Know Your Customer Issues – CDD (cont.) Identify and code high risk customers • Identify datathe bank already has in place • Branches or lines of business may already have lists and reports • NICS codes for loan or business customers • SAR database • CTR database • Cash intensive customers • MSBs using keywords like “liquor”, “check cashing”, “market” wmix@securagroup.com www.securagroup.com

10. Know Your Customer Issues – CDD (cont.) • Code customers/accounts using a BSA software system • Tailor the risk ratings to the bank’s “BSA risk profile” • Document the entire BSA identification and risk rating process • BSA risk ratings are not stagnant • Customers/accounts must be periodically reviewed and risk ratings modified • Assess current activity wmix@securagroup.com www.securagroup.com

11. Know Your Customer Issues – CDD & CIP • At opening, identify and code high risk customers and accounts • Develop enhanced account opening procedures for high risk customers • OFAC and ChexSystem; check is not sufficient for a high risk customer like a PEP • Consider requiring additional information • Consider if an enhanced approval process is appropriate wmix@securagroup.com www.securagroup.com

12. Know Your Customer Issues – Monitoring • The frequency of periodic reviews is determined by risk rating and risk activity • Determine, based on risk assessment, the parameters for each review • Target review: all activities in a specified time period • Routine review: cash or wire activities that fall under a rule or above a threshold • Enhanced review: all activities that fall under a rule or above a threshold • Document decisions and parameters wmix@securagroup.com www.securagroup.com

13. Q & A Banks must have a properly designed, fully integrated and implemented program. Remember that the “proof is in the pudding”! Thank You wmix@securagroup.com www.securagroup.com