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One of the difficulties with talking about member due diligence is that the conversation with regulators typically starts with the question, "how well do you REALLY know your members?" In most parts of Montana, you know all about your members, their family, personal history, deep dark secrets, and more. A better way to introduce the conversation might be, "how well do you understand your member's financial profile and how does that fit into your credit union's risk levels?"
FinCEN's Due Diligence rule requires that credit unions establish and maintain written policies and procedures that are reasonably designed to
- identify and verify the identity of members,
- collect and verify information on the beneficial owners for entities opening accounts,
- understand the nature and purpose of member relationships to develop member risk profiles, and
- conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update member information.
When opening high-risk accounts, your staff may need to ask additional questions on details such as expected transactions, occupation, or account activities. Some common information collected at account opening on these accounts might include
- Purpose of the account
- Source of funds and wealth
- Type of business
- References from prior banking relationships
- Anticipated volume of transactions
- Expected wire transfer activity
- Any relationship to the cannabis industry
Your credit union may identify other appropriate information to collect either at account opening or once the account is deemed to be worth monitoring more closely.
After identifying high-risk accounts and collecting information on expected usage, your credit union needs a method of monitoring the activity so anything outside of "normal" can be either investigated and explained or determined to be "suspicious." Risk profiles may be updated as necessary to ensure your credit union knows the current status of each account, but doing so on all accounts (versus just high-risk accounts) should be dependent on your credit union's overall BSA risk level.
If you don't know how a member intends to use their account or your credit union's services, detecting suspicious activity will be difficult. Larger and even mid-sized credit unions find this expectation difficult to fulfill without the use of software. Notes on any conversations with the member about expected use can also be helpful when they are included in the system for all employees to view them. Ask what your credit union's internal process for recording those types of notes would be.
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