Knowing Your Customers:

Pinpointing Patterns for

Increased Vigilance

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Objectives

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Enhance risk management practices to better mitigate risks

Protect business and make it more profitable

Protect and serve your community – be a good citizen

Suspicious Activity

• Prevent• Detect• Report• Assist

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Culture of Compliance

Signs of a lax, Non-Compliance Culture?

FinCEN’s Culture guidance – FIN-2014-A007Advisory to U.S. Financial Institutions on Promoting a Culture of ComplianceEngaged LeadershipCompliance not compromised by revenue interestsAppropriate internal information sharingAdequate Human and Technological ResourcesEffective Program- Independent, Competent TestingUnderstand importance, utility of reporting

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Sea Change“As Director, I feel it is important that financial institutions take responsibility when their actions violate the BSA. And by accepting responsibility, it is not just about admitting to the facts alleged in FinCEN’s enforcement action. It is also about admitting a violation of the law. Over the last year, we have changed our practice at FinCEN to one in which our presumption is that a settlement of an enforcement action will include an admission to the facts, as well as the violation of law. And, we have begun implementing this practice in our enforcement actions against all sizes and types of financial institutions.

Integrity and transparency goes a long way. It is a great bestowal of trust that enables financial institutions to be part of the U.S. financial system, to be part of the global financial system. And that trust -- that privilege -- comes with obligations. One of those obligations is a responsibility to put effective AML controls in place so criminals and terrorists are not able to operate with impunity in the U.S. financial system.

As FinCEN’s recent enforcement actions show, FinCEN will act under such circumstances to protect the integrity and transparency of the U.S. financial system.”

Jennifer Shasky Calvery, Director, FinCEN

FIBA, Anti-Money Laundering Conference

February 20, 20145

Hard Target OR Soft

Pushover

• Do not compromise yourself• with exceptions• poor documentation• lack of focus or willpower

• Will you be a wet noodle? Man or Mouse?

• Official government ID - real, current• not expired• not international driver’s licenses• not “for novelty purpose only” ID

cards

6

Customer Identification Program• Establishing a reasonable basis to believe person is

who he/she claims to be• Mickey Mouse? Elvis Presley? (I think not….)

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What does KYC look like?

• Before you can Know Your Customer, you need to know your market.

• How do I recognize a customer when I see him/her?

• How do I distinguish a person coming in to buy something that I don’t want to be a “customer”?

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Solid Understanding of Market

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What is normal & expected?

Socio - Economic profile

occupation

education

income

ethnicity

dress

speech patterns

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• Socio-pathic profile

• prevalent problems and issues in our

neighborhood

• familiarity with types of people who may be

perpetrating crimes in our neighborhood

• familiarity with types of victims locally

• Who is being taken advantage of in our

community?

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What is normal & expected?

Good Customer Interface

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STOP!

• Don’t be distracted

• Make eye contact

• Pay attention

• Be alert

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• Be observant

• Really look (not just see)

• Observe demeanor

• Detect signs of deception14

Listen• Clear questions and answers

• non-threatening

• casual alertness

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Who is this person?• Be friendly- you want customers to come back• Details- employment, occupation, title, where• other identifiers• does person actually live/work nearby?• family, friends, business associates, related

customers• What might that tell us?

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What services?• Used, inquired about

• Cross selling is good business practice

• helps understand customer too

• may also help identify red flags

• Does person meet profile of what is expected for market?

• Does timing, frequency of transactions make sense?

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Levels of Knowing• New customer – simple remittance• Repeat remittance customer• Detailed information gathered from multiple tranx

types• No interaction• Moderate interaction• Closely held, limited openness• Too open

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Training - OngoingTraining –

• not just once a year

• can’t set it and forget it

• do risk based refreshers

throughout year

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Role PlayingIsn’t role playing just another way of…

• inspect what you expect?• Allows you to demonstrate how to handle real life

scenarios effectively• Mystery shopping can help prove whether training

is effective or not

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Fraud

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Elder Abuse

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Human Trafficking

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Drug Trafficking

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Terrorist Financing

Jay Postma, CAMSPresidentMSB Compliance Inc.Jay.Postma@MSBComplianceInc.com

John Schmarkey, CAMS, CFEBSA/AML Compliance Specialistjohn.Schmarkey@MSBComplianceInc.com

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