Rethink Customer Due Diligence

By Cameron Jones, Principal Security Intelligence Consultant, SAS

To comply with Bank Secrecy Act and Patriot Act regulations, your institution must give every customer an anti-money laundering (AML) risk rating. When you don’t assign an appropriate rating, it negatively affects the quality of customer due diligence (CDD) and the accuracy of your organization’s overall risk assessment. It’s a cascading impact - failure to identify risks, in tum, can lead to deficiencies in your AML program, which leads to fines, enforcement actions and reputation damage. What are you going to do?

Let’s make this real simple: you can use new analytical tools to monitor deviations in a customer’s transactions or personal information – in real time – continuously assess the AML risk of each customer relationship, and get a pretty good idea about how he will normally behave in the future. His risk level also helps you decide how often – and how rigorously – you need to monitor his accounts. For example, for customers who have a low risk level, you may decide to monitor them continuously using out-of-box algorithms that are run automatically by the software. But for those with higher risk levels, you may decide that they warrant more frequent and robust monitoring.

The goal is to take a more comprehensive and continuous approach to CDD where risk ratings are always up-to-date and reflect the latest demographic and transactional changes.

Traditional and homegrown CDD systems aren't able to support this level of risk management. For example, most support a very manual, time-consuming AML scoring process, which prevents it from being done frequently. And not all CDD solutions will give you the same level of customer risk analysis. Most analyze risks using the same set of limited factors - demographics, geography, and products and services. And they fail to factor in event-based data, such as instances of suspicious activity, deviations from expected activity and other high-risk events.

Read the full paper, Customer Due Diligence: A proactive solution for mitigating tegulatory and reputation risk, to learn how to evaluate your organization's CDD processes and technology relative to current risks and needs. The paper will also explain how automated analytical tools can help you accurately segment and identify customers by the risk they represent so you can monitor them appropriately and make the best use of investigative resources. Given recently enacted compliance laws like the Foreign Account Tax Compliance Act, there’s never been a better time to re-examine your current CDD processes and enabling technology.