Fraud Prevention Blog

The Best Way to really "Know Your Customer"

If you are involved in bank operations management, then you already know that your bank is required to authenticate customer ID documents. Still many banks don’t do this well, and are exposed to compliance-related fines.

What if … You could enhance compliance and position your bank to attract new customers?

In a survey of financial professionals conducted last month, FraudFighter discovered that a vast majority - 85% - of professionals in the financial services industry believe that their branch operations ought to be conducting some type of identity authentication that utilizes photos and/or biometric verification.

Bank Secrecy Act compliance is more important than ever to companies that deal with “covered transactions”.  The cost of fraud has exceeded one trillion dollars and is on the rise.  The Bank Secrecy Act (BSA) was put in place to assist government agencies with stopping money laundering. 

There are three main requirements that the BSA insists of financial institutions to maintain Bank Secrecy Act compliance:

• 1. Keep records for cash purchases of negotiable instruments
• 2. File reports of these purchases
• 3. Report any activity that may be indicative of tax evasion, money laundering or other illegal activities

To deter or prevent illegal activity including terrorism and money laundering, Bank Secrecy Act compliance requires verification of a client's or customer's identity (see prior post: BSA/CIP Client Identification and Verification Requirements) and the reporting of large cash transactions.  This post will focus on the $10,000 Rule for reporting cash transactions.

The Bank Secrecy Act or BSA requires a written Customer Identification Program (CIP) for client identification verification.  Banks particularly must have a CIP that is appropriate for their size and the types of transactions they engage in.  The CIP must be approved by the banks board of directors and its implementation, including customer identification verification is not only a matter of compliance but necessary for protection from risk to the banks reputation.

Every year, millions of "fake" notes are passed over retail counters and the majority are not identified as counterfeit until they're examined by the bank.  Most often, retail associates don't know how to identify legitimate money or they rely on the simplest of all anti-counterfeiting tools; the counterfeit pen.  Unfortunately, relying on the pen alone is not going to catch anyone other than an amateur who is printing money on a laser printer. 

If you have followed the news at all lately, you have likely heard that financial institutions of all stripes are coming under greater scrutiny, with proposals for ever-tighter regulation still on the horizon. This includes not only bank lending and deposit activities, but also the manner in which all institutions vet their clients - former, current and future. In large part this is an attempt to mitigate identity theft. Creative identity thieves have been able to steal personal identification information  from thousands of accounts. Creating false identities and fake ID Documents to open new lines of credit has become easier than ever.

It is perhaps a sign of the times when the annual convention of anti-money laundering professionals draws a record attendance. This year, the Association of Certified Anti-Money Laundering Specialists (ACAMS) met for the 10th year straight, covering financial fraud from both a global and a organization-focused perspective, and celebrating both a record turnout for the convention and a new high in membership.