Instilling a Culture of Compliance

and

Knowing Your Customers

Objectives

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

Culture of ComplianceSigns of a lax, Non-Compliance Culture?

FinCEN’s Culture guidance – FIN-2014-A007Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance

Engaged LeadershipCompliance not compromised by revenue interestsAppropriate internal information sharingAdequate Human and Technological ResourcesEffective Program- Independent, Competent TestingUnderstand importance, utility of reporting

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, FinCENFIBA, Anti-Money Laundering Conference

February 20, 2014

Hard Target OR Soft PushoverDo not compromise yourself

with exceptionspoor documentationlack of focus or willpower

Will you be a wet noodle? Man or Mouse?Official government ID - real, current

not expirednot international driver’s licensesnot “for novelty purpose only” ID cards

Customer Identification ProgramEstablishing a reasonable basis to believe person is

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

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”?

Solid Understanding

of Market

What is normal & expected?Socio - Economic profile

occupation

education

income

ethnicity

dress

speech patterns

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?

What is normal & expected?

Good Customer Interface

STOP!

Don’t be

distracted

Make eye contact

Pay attention

Be alert

Look!

Be observant

Really look (not just see)

Observe demeanor

Detect signs of deception

Listen

Clear questions

and answers

non-threatening

casual alertness

Who is this person?Be friendly- you want customers to come

backDetails- employment, occupation, title,

whereother identifiersdoes person actually live/work nearby?family, friends, business associates, related

customersWhat might that tell us?

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?

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

Training - Ongoing

Training –

not just once a year

can’t set it and forget

it

do risk based

refreshers

throughout year

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

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

www.MSBComplianceInc.com

www.Twitter.com/MSBCompliance

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