Are you guys asking new account customers any Customer Due Diligence/Enhanced Due Diligence Questions when they are at your CSR desks? We implemented asking several of these a couple of years ago (some for consumer accounts, some for business accounts-Ken G. will recognize the questions from his awesome seminars! ). We are now re-visiting our account opening process to see what we can streamline to speed up the process (CIP, Red flags, getting ID, etc). and these due diligence questions are getting a hard look and folks are wanting to discontinue them. We have done a local survey of other bankers and it seems we are in a minority, but we are a smaller community bank without the luxury of a steep and well-staffed AML department to monitor accounts. My question to you is this: are we the only ones out there asking questions about cash/wire/etc. activity of customers that are new to us? We have tried to dress these questions in the "what other services/products can we offer you" clothing, but I don't think this is how these questions are being presented. We are considering tossing them altogether (despite a BSA risk assessment that would like for them to stay since the info we think we have received from these questions has been helpful in some instances) and we do have an automated AML system that is close to being 100% up and running. What are others doing and what necks of the woods are you in that is prompting you to ask or not ask anything other than the basic info when opening accounts? We don't want to interrogate our customers, but we would like to know basic info and a little more if we can get it to make sure that if any unusual activity comes across that we can discount it or verify that ID theft or other fraud is not occurring. Any feedback would be great.

We are getting ready to start using more CDD questions at the new account desk, but only for those high risk customers. We will be asking the questions of all businesses and of all individuals who are non-resident aliens, PEPs, etc. or who are rated a moderate to high risk.

We are a small community bank ($475M in assets) in NE Texas.

We ask these types of questions of all new customers. If we didn't, we'd have no starting point for our high risk account monitoring. We are a very small community bank of $125 million in assets.

Smash and AuditorK-do either of you get grief from your current customers now of the questions that you do ask already? We are in Oklahoma so we understand the NRA issue completely and we are $420M in assets. We have been told cusotmers look at the employees like they are nuts when asked about the PEP issue, but how else are we to know if a customer is one if we don't ask? We don't provide private banking services, but I still understand that a PEP could still open an account with us even if we didn't offer those specialized accounts. How do you explain this issue to your customers?

The grief comes from the new accounts reps. The questions are on the application and when they don't get filled out, the new accounts rep is supposed to gather the info. That's where the grief comes in because they have a hard time explaining the need for the information and so often they don't collect it. Up to now it has not been an exam issue.

I didn't do a good job of explaining in my last post. We will be asking more questions because we will be eliminating the questions on the application in favor of a service we are signing up for that will force the reps to ask questions. However, I plan to make our questions minimal to none if an individual gives me an unexpired instate DL, SSN, DOB, and good address. This is a low risk to me. If I get an out-of-state DL, an ITIN, or some discrepancy, I might ask a few more. If I get a passport and no SSN, I will be asking NRA and PEP questions. It's a graduated inquiry.

As far as explanation, I always train our employees to go with the straight-forward approach: "We live in different times than we did 20 years ago. There is a greater level of scrutiny on transactions that run through the US banking system, and banks are compelled by federal regulations to know and understand the activity of our customers. We monitor all our customers' activity in order to report any potentially unlawlul activity as required by law. We are asking these questions so that we can know what to expect from you." Or something along those lines. Hopefully and likely, it will scare off only those who have something to hide, freeing up your resources for more meaningful endeavors!

I like this approach and great clarification. Thanks!

Like smash says, most of the grief comes from the CSRs that are opening the accounts. They feel awkward asking for this information. I also explain that they should tell the customer why we need this information - similar to what smash had indicated.

You are not the only ones asking these questions. In fact during a regulatory exam last year I was asked to beef up the amount of information collected at account opening (which we were already gathering quite a bit at the time). We do ask different questions based on the customer (personal vs. business) and the type of risk involved.

You are fortunate if the only push back you are receiving is from your CSRs-mine complain to management who then come down on me and who try to make it look like I am out for everyone's DNA and that no other Bank is asking this horrible questions.

I frequently review the questions asked and results to look for changes that both provide better information and streamline the account opening process for our CSRs.

We are a community bank in southwest florida and have almost 500 million in assets.

We are a large community bank and we have had these EDD questions hard-wired into the system at account opening (the rep cannot bypass them). Everything from HIFCA to PEP and all in between--expected activity, etc. It has been a very good way to ensure we do not have a lot of lookback for high-risk customers and the customers don't seem to mind, as smash said, when you're straightforward and pleasant.

Rant warning

This is going to sound like pure heresy...

Banks should review their CDD efforts and questions diligently and routinely, but they should put as much emphasis on removing questions that generate unused information as they do on adding new questions.

Most due diligence information is never used. The questions are asked and the information is recorded, but we generally do not look at it again until the customer's activity draws them into question. What percentage of your customer's ever get exposed to the type of review where the due diligence information proved helpful?

More to the point, if the customer does deserve a second look the big picture questions should be 1) did we use the information we got and 2) what was it we wish we had asked this customer, but we did not?

My personal opinion (strongly held) is that most of the due diligence information obtained on consumers is a gross waste of time and effort. Due diligence and enhanced due diligence are key components of the bank's AML program, not an effort to prevent nickel and dime frauds.

The odds are that consumer accounts are not going to be used to launder money. Risk management is about playing the odds; if you spend 100% of your available time on 100% of your customers you are squandering limited resources. A more reasonable allocation of effort is that you spend 95% of your resources on 5% of your customers.

I do not give a rat's ___ about employee resistance to asking questions, but I am sensitive to the fact that consumer customers recognize the process as a complete waste of time.

As complicated as some people think CTR completion is, it used to be a lot worse. Congress finally had to pass a law directing Treasury to remove all of the questions that elicited information the government did not actually use. That yielded the "simplified" CTR form we all know and love today.

We are ruled by the government and we are starting to act like the government.

The questions can be tiered, with additional questions being asked depending up answers. Everyone doesn't have to be asked everything. And - here is Kathleen's rant - they can be asked in a business development fashion. Ask them BEFORE you select an account for the person...some questions are needed to know just what account they need, the low volume free account, the higher volume higher fee account, etc.

It's not that hard. Are you already asking questions that get you some of this info and you just haven't realized that? How do you get people into the right accounts, know if they need a wire agreement, etc?

Once that is established, go off into other questions as triggered by info provided - PEP questions if presented with an ITIN, foreign passport, etc. for example.

I see banks frequently who can't tell me who their NRAs are, and so forth.

Kathleen, I agree completely, and this is how we handle it--if you smoothly move the customer through the questions you acomplish the goals of fitting them to the right product and gathering the pertinent information for your CDD/EDD at the same time.

You made my day!

Welcome! Happy Weekend!!

Absolutely. We don't want our customers to feel as if they are undergoing Chinese water torture when they try to open an account with us. We need to train our new accounts personnel on how to ask the questions.

We could say...Well, Mr. Jones I need to know if you are a money service business, so do you cash checks for your customers? Ever? Especially over $1000?

or we could say...Mr. Jones, we certainly want to make sure that we can satisfactorily service your account. Will you be needing access to cash for check cashing or ATM replenishment?

I'll add my little 2cents on one of the main reasons why this became an issue - namely that the New Accounts position is one that, typically, is not held in high regard by management and/or is somewhat of an entry level position or perhaps one step up from a teller. The result is that the position is typically subject to constant turnover and management is reluctant in committing much in the way of resources for training. (And sorry, but I don't consider completing one or two CBT's each month to be "real" training - it's just something that you can print out on a spreadsheet, dates and test results, to satisfay an auditor or examiner.)

So rather than having professionals that are focused on the goals of this position:
1. Safeguarding the bank against fraud
2. Providing the maximum efficiency and service for the customer
3. Increasing sales and account relationships for the bank
You have folks that simply have one "sales mandate" after another dumped in their lap while at the same time being treated with a bit of disdain by the lenders at the branch (and don't tell me that doesn't happen because I've seen it at too many banks!) who are looking for the next job higher up the career ladder whether its inside or outside of the institution.

So if you want to gather any meaningful data at account opening, you are basically forced to rely on checklists and questionnaires since you normally won't have a dedicated professional who understands the purpose and importance of the New Accounts area.

Disclaimer - I know that there ARE dedicated New Account professionals - typically at smaller institutions - that have the instincts on what questions to ask and how to ask them, but those folks tend to be the exception rather than the rule. In any event, I am not disparaging the New Account professionals, but rather typical bank management attitude towards that position (i.e. the ugly stepchild of the Business Development Officer) as the reason that proper due diligence at account opening will continue to be a challenge.

Okay - stepping off soapbox....

We are a community bank with assests of about $375 million. We have been doing CDD/EDD at account opening and completing a risk matrix for these new customers for about 3 years now. As we re-visit the risk matrix we are finding that the questions being asked are not providing the results we were hoping for. It is a lot of paper work and man hours for an AML department that consists of 1 individual. We have found that it is actually the employees finding suspicious activity and reporting it (this is where training employees comes into the picture) than reviewing and watching high/medium risked customers. Could we be safe in saying that after 3 years of risk rating our new customers we have found that our customer base is low and accept the risk that may come into play by not completing the risk matrix?

Does anyone have a matrix they would be willing to share? Maybe we are asking the wrong questions in order to get the results we need.

You would be justified in reducing the risk levels of your general consumer population; it seems your work has shown that you have them rated too high. You could change the process to only ask CDD/EDD questions if certain answers pop up in the account opening process (to identify NRAs and PEPs for example) and for commercial accounts to identify check cashers, etc.

No CDD/EDD is going to tell you who is more likely to kite or structure deposits/withdrawals, which tends to the be troublesome consumer problems.

I have seen small banks use a variation of the chart in the FFIEC BSA manual to stratify their customer risk.

http://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_111.htm