TECHNOLOGY AND FINANCIAL CRIMES

We are living in the Technology Age where most things are within our reach simply with the click of a mouse or a voice command. Millions of transactions are done on a daily basis via the internet. Globalization and interconnectivity has enabled us to reach across seas and into exotic lands, while sitting at home or in a cafe' to transact business. Many financial institutions are also using the internet to connect with customers, for advertising and promoting new products. Community banks are taking advantage of this online explosion as a marketing tool not only to retain existing customers but to capture new ones, increase loans or deposits and promote new products with appealing features. For many people it is easier and faster to open an account on the internet, rather than standing and waiting in a line at the bank. It is more convenient, fits a busy schedule and often requires fewer forms or disclosures to read and complete. Just as the internet provides opportunity, so too does it pose a threat to banks. Faceless crooks abound, using technology to set-up accounts for money laundering or conduct other financial crimes. How well do you know the person or entity you are banking, when you have never met them face to face? What steps should you take to ensure that your potential client is safe and how do you "know" them? All bankers understand knowing your customer (KYC) is vital to ensure that relationships are strong and safe. A good Customer Identification Program (CIP) was introduced by regulators to help safeguard the system, prevent or decrease fraud, money laundering and combat the funding of terrorists. It is standard practice now for each person who requests you to open an account for them be identified with standards that require four key pieces of information such as name, date of birth, address (physical address-no postal boxes) and an identifying number such as social security. For business entities, valid licenses, recorded documents, articles of incorporation and trust documents are required and must be verified at the time of opening the account. Prudent bankers follow policies and procedures when identifying customers and make sure all boxes are properly checked as part of the process. Verifying each individual or entity and utilizing available government resources to assist in the verification process make sense and are used often by community bankers. For example, the Office of Foreign Asset Control (OFAC) site may be used when opening an account to ensure the individual or entity listed isn't an issue and name searches may be matched against other listings such as the Political Exposed Persons list (PEP). By reviewing and comparing OFAC results carefully, banks are protected and integrity in the process is maintained. Educating and training employees to follow OFAC procedures, understand which countries or organizations are sanctioned and avoiding issues just makes sense. No one wants to pay fines or have bad publicity, so reminding staff, updating policies and procedures and testing compliance are good practices. Doing so will ensure your bank is not only efficient, but ultimately prevents money laundering and other financial crimes.