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By Shannon Bennett
unions often worry that each new regulation will make it harder to provide members
with speedy service. This is especially true considering the responsibilities
that accompany the member identification regulations associated with Section
326 of the USA PATRIOT Act. The days of verifying an individual's identity by
obtaining a social security number, looking at a driver's license, and calling
up a negative database search before handing them a starter kit of checks are
gone. Complying with the regulations now brings added elements of identity verification.
Perhaps the best solution for an effective CIP that does not slow the account-opening
process is having policies and procedures in place that utilize technology to
prevent and detect identity theft.
Trying to manually verify a member's identity can be time consuming and almost
impossible. The time it takes to manually confirm the identity of an individual
or entity may allow criminals access into your system before discovering the
documents they used to open their account were either stolen or bogus. The USA
PATRIOT Act requires that you verify a member's identity within a "reasonable"
The many steps required to approve a new member can make it tempting for an
employee to bypass some of them if the member is frustrated or the employee
is in a hurry. Using technology as part of your procedures greatly simplifies
and expedites the process and lessens the chances an employee might ignore certain
steps. Having a system that provides a consistent approach to verifying a member's
information also minimizes the chance of profiling is another important consideration.
There are many other advantages to incorporating technology into your CIP procedures.
The USA PATRIOT Act requires that your CIP include risked-based procedures when
determining the identity of a member. Having the right system that is designed
to measure the risk of each potential member can meet the requirement. With
the use of technology, you can automate your member identification procedures
into your work flow. The right system can provide your staff with the proper
questions to ask at account opening, and the system will then follow up with
recommendations on how to proceed with the transaction. If further due diligence
is required, some systems are designed to automatically pass the member's information
into multiple databases and public records to actually verify the data. Having
a CIP solution that provides help text to your employees when the system assigns
a high-risk rating or discovers a possible fraud situation allows the employee
to conduct business as usual without putting the potential member on notice.
Section 326 of the USA PATRIOT Act requires you to compare member information
against government lists and lists of known terrorists. With the lists of known
terrorists continually growing, manually checking and rechecking them is inefficient
and time consuming. Effectively meeting this obligation requires having a comprehensive
system that continually monitors and updates the names of terrorists and their
organizations. Although some systems can screen a member's name against lists,
such as Office of Foreign Assets Control (OFAC) and the 314(a) list, having
a solution that gives you the option of either integrating into your work flow
with real-time results or being able to batch process at night is clearly beneficial.
Finally, documenting and maintaining certain information is another important
element of Section 326. Having an automated CIP solution that collects and maintains
the required documentation for the two-tiered record requirement gives credit
unions assurance that they are meeting the rule. Using technology to collect
and store the information eliminates the nightmare of relying on staff to properly
document and retain the required information. With the use of technology, the
ability to retrieve necessary data also cuts down on the hours usually spent
to gather information that was collected years earlier.
Preventing your credit union from being used by identity thieves means having
an effective "Customer Identification Program," which includes policies
and procedures that utilizes technology to prevent and detect identity theft.
With the right system, providing good member service does not have to be a thing
of the past.
Shannon Bennett, CRCM, is the Financial Intelligence Compliance
Manager at Bankers Systems, Inc., a leading national provider of compliance
tools, technology, and services for financial organizations and their legal
counsel. Approximately one third of all credit unions in the United States use
a Bankers Systems solution.
November 8, 2004
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