Fraud Prevention Blog

Financial Services Industry needs to become Global Leaders in Identity Authentication

Over the past month, we conducted a poll of compliance officers from different industries - banks, credit unions, casinos and other businesses obligated to comply with the Bank Secrecy Act (“BSA”).  Our purpose was to try to get feedback about what, exactly, companies are doing as part of their efforts to “know their customers”, as required under the BSA.

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

There are a number of ways to achieve compliance with anti money laundering regulations by authenticating ID documents.  Relying on the skill of bank managers, clerks and other front line applicant processors is not one of them. 

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.

(BSA) Bank Secrecy Act and (FACTA) Fair and Accurate Credit Transactions Act:Red Flag Rules

Complying with the BSA Bank Secrecy Act via ID authentication is simply a matter of implementing a written Identity protection policy and backing that up with the technology to verify the identity of any person seeking, renewing or continuing credit.  The purpose of the BSA Red Flag Rules is to require anyone associated with the issuance of credit, or making a credit decision, to implement policies and procedures for the prevention of identity theft and to

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.

Scenario:  A financial institution is opening a new branch, and is starting a major local PR blitz for new customer acquisition.  Great incentives are being offered for new account holders, and a large response is anticipated.  How does the bank process a flurry of new applications, yet conduct thorough “trust” identification verifications in a timely manner to prevent identity theft? 

The last several weeks have seen a number of noteworthy arrests for money laundering. A fugitive American, who pled guilty to money laundering charges eight years ago but disappeared while out on bail, was finally returned to the U.S. after being apprehended in Mexico last year. And a Jamaican national was sentenced to 30 years in prison in the U.S. for money laundering, and ordered to pay $55 million in restitution to his victims – after he finishes out his 6 ½ year term for a prior conviction in Jamaica.