Training to Identify Suspicious Activity

The identification and reporting of suspicious activity is a troublesome challenge for financial institutions. We are supposed to give good customer service and value each customer. We are supposed to build relationships with customers by giving good service, by respecting the customer, and by encouraging the customer to try other products that we offer.

At the same time, we are supposed to watch our customers carefully, identify anyone who is or may be doing something suspicious, and then tell on them by filing a Suspicious Activity Report. Balancing customer service with suspicion is not easy.

Even the appropriate level of compliance is not clear. Examiners are citing violations of BSA for not reporting suspicious activity and for failing to identify suspicious activity. They are wont to dig into situations that were not reported and question why. Several recent cases involve significant civil money penalties for bank failures in identifying and reporting suspicious activity.

Then, on the other hand, we have the Director of FinCEN suggesting that there is too much SAR filing and that financial institutions are filling the database with white noise by "defensive SAR filing." He has suggested that the industry should be more selective in the decision to file a SAR so that law enforcement does not become lost in a forest of data.

As we struggle to balance these concerns, stories run in prominent newspapers, such as the Wall Street Journal, describing the alleged failure of financial institutions to identify and stop money laundering. This adds to the regulatory pressure by raising the concerns of readers. It also adds to the information available to our customers about the CTR and SAR process, making some customers leery of what the teller or CSR is up to.

How do we strike the right balance? The balance begins on the front line. Tellers and customer service representatives are the staff most likely to encounter those who are up to no good. They also control the institution's relationships with the good and valued customers. Training for the front line must do more than review the requirements for completing a CTR and identifying and reporting suspicious activity. Training must devote some time to the art of providing customer service while evaluating who the customer really is.

Here are some suggestions for discussion in training.

Look the customer in the eyes.
This communicates a positive message to the consumer while you make sure that you see the customer clearly. It conveys that you are paying attention to the customer and to no-one else. It also helps you to evaluate the truth of what the customer is telling you. As the poets say, the eyes are the window to the soul. Use that window!

Pay close attention to the customer.
Nothing is quite as complementary as paying close attention. This communicates that you and the institution care about the customer's business and value the customer. It also ensures that you hear and understand what the customer is saying and doing. When determining the customer's identity and validity, you must stay alert.

Think about what the customer is saying.
It is a key part of customer identification to evaluate what the customer is telling you and whether it makes sense. You must consider whether the customer's business or employment is consistent with their banking interests. In the process of thinking about what the customer is saying, you again communicate that the customer matters to you. It is a part of excellent service.

Ask questions, make suggestions and watch how the customer responds.
Asking questions may seem invasive, but to the customer it is more likely to seem that you really are paying attention. Making certain that you understand the customer and his or her needs is simply good customer service. And, the customer's reactions to the questions, and the customer's answers, can tell you a great deal about the customer's honesty.

Follow up with the customer.
It is becoming a standard practice to contact the customer a few days after a new account is opened. It is done in the name of customer service. It is also a critical step in identifying the customer and making sure the customer is who he or she claims to be. By following up, and by asking questions, you are providing excellent service to your customers and helping to protect victims of identity theft.

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 16, 1/05