Knowing Your Customers: Pinpointing Patterns for Increased Vigilance
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The document outlines objectives for enhancing risk management practices to prevent and detect suspicious activities in financial institutions, with an emphasis on compliance culture and internal resources. It highlights the importance of knowing customers, understanding market norms, and observing customer behavior to identify potential risks. Ongoing training, including real-life scenario role-playing, is essential for maintaining effective compliance and addressing issues such as fraud, elder abuse, and human trafficking.
Knowing Your Customers: Pinpointing Patterns for Increased Vigilance
- 1. Knowing Your Customers: Pinpointing Patterns for Increased Vigilance 1
- 2. Objectives Enhance risk management practices to better mitigate risks Protect business and make it more profitable Protect and serve your community – be a good citizen 2
- 3. Suspicious Activity • Prevent • Detect • Report • Assist 3
- 4. Culture of Compliance Signs of a lax, Non-Compliance Culture? FinCEN’s Culture guidance – FIN-2014-A007 Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance Engaged Leadership Compliance not compromised by revenue interests Appropriate internal information sharing Adequate Human and Technological Resources Effective Program- Independent, Competent Testing Understand importance, utility of reporting 4
- 5. Sea Change “As Director, I feel it is important that financial institutions take responsibility when their actions violate the BSA. And by accepting responsibility, it is not just about admitting to the facts alleged in FinCEN’s enforcement action. It is also about admitting a violation of the law. Over the last year, we have changed our practice at FinCEN to one in which our presumption is that a settlement of an enforcement action will include an admission to the facts, as well as the violation of law. And, we have begun implementing this practice in our enforcement actions against all sizes and types of financial institutions. Integrity and transparency goes a long way. It is a great bestowal of trust that enables financial institutions to be part of the U.S. financial system, to be part of the global financial system. And that trust -- that privilege -- comes with obligations. One of those obligations is a responsibility to put effective AML controls in place so criminals and terrorists are not able to operate with impunity in the U.S. financial system. As FinCEN’s recent enforcement actions show, FinCEN will act under such circumstances to protect the integrity and transparency of the U.S. financial system.” Jennifer Shasky Calvery, Director, FinCEN FIBA, Anti-Money Laundering Conference February 20, 2014 5
- 6. Hard Target OR Soft Pushover • Do not compromise yourself • with exceptions • poor documentation • lack of focus or willpower • Will you be a wet noodle? Man or Mouse? • Official government ID - real, current • not expired • not international driver’s licenses • not “for novelty purpose only” ID cards 6
- 7. Customer Identification Program • Establishing a reasonable basis to believe person is who he/she claims to be • Mickey Mouse? Elvis Presley? (I think not….) 7
- 8. What does KYC look like? • Before you can Know Your Customer, you need to know your market. • How do I recognize a customer when I see him/her? • How do I distinguish a person coming in to buy something that I don’t want to be a “customer”? 8
- 9. Solid Understanding of Market 9
- 10. What is normal & expected? Socio - Economic profile occupation education income ethnicity dress speech patterns 10
- 11. What is normal & expected? • Socio-pathic profile • prevalent problems and issues in our neighborhood • familiarity with types of people who may be perpetrating crimes in our neighborhood • familiarity with types of victims locally • Who is being taken advantage of in our community? 11
- 12. Good Customer Interface 12
- 13. STOP! • Don’t be distracted • Make eye contact • Pay attention • Be alert 13
- 14. • Be observant • Really look (not just see) • Observe demeanor • Detect signs of deception 14
- 15. Listen • Clear questions and answers • non-threatening • casual alertness 15
- 16. Who is this person? • Be friendly- you want customers to come back • Details- employment, occupation, title, where • other identifiers • does person actually live/work nearby? • family, friends, business associates, related customers • What might that tell us? 16
- 17. What services? • Used, inquired about • Cross selling is good business practice • helps understand customer too • may also help identify red flags • Does person meet profile of what is expected for market? • Does timing, frequency of transactions make sense? 17
- 18. Levels of Knowing • New customer – simple remittance • Repeat remittance customer • Detailed information gathered from multiple tranx types • No interaction • Moderate interaction • Closely held, limited openness • Too open 18
- 19. Training - Ongoing Training – • not just once a year • can’t set it and forget it • do risk based refreshers throughout year 19
- 20. Role Playing Isn’t role playing just another way of… • inspect what you expect? • Allows you to demonstrate how to handle real life scenarios effectively • Mystery shopping can help prove whether training is effective or not 20
- 21. 21 Fraud
- 22. 22 Elder Abuse
- 26. Jay Postma, CAMS President MSB Compliance Inc. Jay.Postma@MSBComplianceInc.com John Schmarkey, CAMS, CFE BSA/AML Compliance Specialist john.Schmarkey@MSBComplianceInc.com 26 www.MSBComplianceInc.com www.Twitter.com/MSBCompliance Weekly newsletter: www.paper.MSBComplianceInc.com