BSA/AML Examiner School Case Study

Internal Use Only

CIP vs. Customer Due Diligence Customer identification procedures (CIP) only provide assurance that the Bank knows the identity of its customer. It does not tell the Bank what the customer does or what sort of transactions the Bank might expect from the customer. Therefore, CIP requirements (name, address, DOB and SSN1TIN) do not provide enough useful information to establish the level or type of Anti-Money Laundering risk that customer presents. Making a valid assessment at the time of account opening and later during the life of the account requires more information. Hierarchy of CIP, CDD, and EDD at Account Opening • Enhanced due diligence (EDD) includes extraordinary questions because the person or entity has been identified as subject to expanded review procedures. Information sought is needed to more specifically predict account activity and increase the bank's comfort level with the relationship. Refer to list of high risk customers. • Customer due diligence (CDD) consists of routine questions which broadly predicts account activity, but specifically identify persons and entities subject to enhanced due diligence. • Customer Identification program (CIP) describes routine requirements for specific information which identifies the person or entity. Verification by documentary or non-documentary methods is required. Hierarchy of CDD, and EDD during the life of account • Enhanced due diligence (EDD) applies to higher risk customers and incorporates monitoring specific to that customer, i.e. transactions are analyzed via comparison to the account officers documentation for that specific customer. For customers identified as "high risk," the monitoring is routine. However, an unusual or suspicious transaction may prompt analysis of a customer not previously recognized as high risk. In either case, unusual activities that are not resolved are referred for SAR consideration. • Customer due diligence (CDD) consist of reviewing name of banks system and/or reports and customers transactions looking for activity that does not fit normal consumer or business account activity. Unusual and suspicious activity is investigated. Customer Due Diligence (CDD) - New Customers The concept of Customer Due Diligence begins with verifying the customer's identity and assessing the risk associated with that customer. CDD suggests the use of a questionnaire and/or multiple questions interview routine by the account officer opening the account. Your goal during the customer due diligence question interview is to find out if the customer is high risk, and if they are you must apply the Enhanced Due Diligence. Customer due diligence is an ongoing process, the account officers should take certain measures to ensure that customers information is always current and that the account is being monitored for unusual activity by the account officer and the BSA Department. Customer Due diligence begins with: 1. Identifying the customer by applying proper Customer identification procedures (CIP) - Name, physical address, DOB, TIN/SSN and obtaining the necessary documents specified in the CIP to verify this information. NOTE: For CIP, it is not sufficient to just obtain the required information in the CIF screen, you must also get proper documents (hardcopy) that proves that the information obtain from the customer is actually correct. 2. Next, you must obtain occupation, place of employment and contact information (telephone number, work number or business number, email addresses, etc.). Please make sure to complete all the CIF

For Training Purposes Only

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