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Customer Due Diligence for All Accounts
Friday, September 29, 2017 6:50 AM

The Financial Crimes Enforcement Network’s (FinCEN) new customer due diligence (CDD) requirements for business accounts will be effective May 18, 2018. A recent CUNA CompBlog post examines CDD procedures and requirements.

Bank Secrecy Act regulations do not have specific provisions for CDD requirements for non-business accounts; credit unions generally rely on the Federal Financial Institutions Examination Council’s (FFFIEC) examination manual for guidance.

The CDD guidance recommends credit unions:

  • Know the true identity of its members;
  • Gain an understanding of a member’s normal and expected transaction activity, based on their occupation or business operations to better determine if something is suspicious, and whether a suspicious activity report (SAR) needs to be filed;
  • Keep an eye out for indicators of potential changes in the member’s risk profile. For example a change in employment, a change in business operations, or unexpected account activity; and
  • Include procedures to periodically monitor the member’s information.

According to the examination manual, a credit union’s Bank Secrecy Act/anti-money laundering (BSA/AML) program should include due diligence procedures that:

  • Are commensurate with the credit union’s BSA/AML risk profile, with particular attention paid to high-risk members;
  • Contain a clear statement of management’s overall expectations, as well as management’s expectations regarding staff responsibilities;
  • Ensure the credit union possesses sufficient member information to implement an effective suspicious activity monitoring system;
  • Provide guidance for documenting analysis associated with the due diligence process, including guidance for resolving issues when insufficient or inaccurate information is obtained; and
  • As a best practice, ensure the credit union maintains current member information.

Once credit unions have identified high-risk members, it should consider obtaining specific information, including source of funds, occupation, place of employment, etc.

Source:  CUNA CompBlog.