BSA/AML Student Exercises Dec. 2022

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 screens with as much information as possible in case it is needed to classify the customer as high risk later over the life of the account. 3. Evaluate the nature of the relationship. For example, determining the length of a customer's relationship with the Bank, the products and services provided to a customer and the manner in which a customer was referred to the Bank. The nature of a customer's relationship may serve to mitigate or to increase the overall risk indicators described below. 4. During account creation the account officer is required to ask several questions to identify if the customer should be classified as high risk based on the High Risk listing provided by our regulators. Customer Due Diligence (CDD) is best described as obtaining information at account opening and during the life of the account that helps our bank in identifying potential high risk customers. Once those customers are identified, they become subject to enhanced due diligence (EDD). Enhanced Due Diligence- High Risk Customers • Enhanced customer due diligence is used when a customer presents an element of risk that requires additional documentation and additional monitoring over and above that necessitated in routine customer relationship. • If you have identified a High Risk Customer (refer to the listing of high risk customer/entitles) during account opening, you should consider obtaining the following information as part of the Enhanced Due Diligence . Please refer to attachment for list of items required on High Risk Customer. Exhibit A • It is likely that you know this information about the existing and potential customers already. The challenge is to make sure it is documented in a paper or electronic file, particularly for those customers that meet the regulators' definition of high risk. Monitoring High Risk Customers for Unusual Account Activity • High risk customer and their transactions should be reviewed more closely at account opening and more frequently through the term of their relations with the bank. Enhanced due diligence for high risk customers is especially critical in understanding their anticipated transactions and to be able to implement an adequate monitoring system for suspicious activity.

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