BY CINDY HAGAN
The deadline for compliance with enhanced due diligence looms. Is your credit union ready to meet the requirements? Keep reading for a rundown of the four key steps, along with some professional recommendations, your CU should be following in preparation of its due diligence process.
Beginning May 11, 2018, all covered financial institutions must comply with the Financial Crimes Enforcement Network’s (FinCEN’s) final rule for enhanced due diligence (EDD) requirements under the Bank Secrecy Act. The regulation became effective July 11, 2016, but institutions were given 22 months to institute procedures to provide the necessary identification, verification and monitoring.
A strong Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program includes member due-diligence policies that are comprehensive. It encompasses procedures for all members and special processes for those who present a higher risk for money laundering and terrorist financing. The EDD process is meant to help predict the types of transactions a member is likely to have and to pinpoint those that may be suspicious.
Member-related due diligence begins with understanding who your members are, along with the intended purpose and types of accounts and services they plan to use. At Sollievo, we have identified four key steps that are necessary for a due-diligence process:
- Ensure proof and verification of a member’s identity.Credit unions must verify enough information to form a reasonable belief that they know a member’s identity. Procedures should specify which documents to use for identification and when to use them,when to use non-documentary methods and when to use a combination of the two approaches.Because fake documents are easily available, Sollievo recommends that our clients’ processes call for a review of more than a single document.
- Researching unfamiliar documents to verify validity –Institutions must be able to reasonably assure a member’s identity; e.g.,if s/he provides a driver’s license from another state, check it out online since most states’ websites exhibit an example of their licenses. Birth certificates also vary from state to state and require extra checking. If the member uses a U.S. passport, check the expiration date. If s/he isn’t a U.S. citizen, require a passport and visa, noting expiration dates on both. Regardless of the documents used, your credit union should retain copies. A notable exception is if a member uses a military ID, which is illegal to photocopy. Instead, note address, date of birth and taxpayer ID number.