BBP Partners Blog

Enhanced Due Diligence

Posted by Eric Fudo

Nov 28, 2013 10:28:00 AM

This week we are sharing a guest blog post from Jody Nappier. Jody is a Senior AML Investigator/Quality Control and AML Right Source. You can learn more about Jody in her bio below, following the article.

enhanced_due_diligence_After speaking with many of my clients, it has become very clear that the High Risk Clients Enhanced Due Diligence (EDD) Reviews are currently the primary focus of many bank regulators.

So what exactly is a High Risk EDD Review?

  • Once a high risk client has been identified, an in-depth profile on the business or individual is crucial in order to anticipate the entities transactions and properly monitor the client. The EDD Review assists the bank in maintaining its reputation and minimizing its compliance and transactional risk.

So what information should be included in a High Risk EDD Review?

  • Who has ownership or control of the account?
  • What is the client’s occupation?
  • What is the account used for by the client?
  • What is the source of funds to the account?
  • Where is the business or individual’s home or work location in proximity to the branch where the account was opened?
  • What is the anticipated volume of currency, wires, checks and ACH transactions?

If a business:

  • Where was the business organized?
  • What does the business do?
  • What is the primary area of operation for the business and are international transactions expected?

The Federal Financial Institutions Examination Council (FFIEC) Bank Secrecy Act Anti-Money Laundering Examination Manual, states banks should consider obtaining, both at account opening and throughout the relationship, the following documentation from business clients.

  • Current financial statements
  • Banking references
  • A list of major customers and suppliers

How often should EDD information be gathered and an EDD be conducted on a High Risk Client?

  • Account opening offers an ideal opportunity to gather much of the necessary EDD information for a client profile, and should be built into your banks account opening process. This is a good business practice whether a client is high risk or not.
  • A 90 day new account review allows the bank to review account activity against what the client stated would be normal activity.
  • Quarterly, semi-annually or annually based EDD reviews should be conducted on the high risk clients based on the clients risk rating and the banks policy and procedures. During the EDD Review, explanations for changes in account activity should be addressed.
  • Documentation such as Financial Statements and lists of the businesses major customers and suppliers should be updated annually.
  • Money Service Business registration should be updated annually or semiannually based on new or renewal guidelines. You can find additional information on Money Service Businesses at FinCEN’s website.

So be prepared when your regulator arrives to address how you are monitoring your High Risk Customers and what your banks EDD Review Process consists of. The key to a sound bank is to know who your customers are and what risk they pose to your institution and that is just good business. 

Jody L. Nappier serves as a Senior AML Investigator/Quality Control for AML RightSource. She has thirteen years of progressive banking experience, nine of those years spent in AML/BSA, working for Charter One Bank, Park View Federal Savings Bank, PNC Bank and HSBC Securities Inc. During Jody’s career, she has held positions as Head Teller, Compliance Analyst, Senior KYC Remediation Analyst, Senior Compliance Analyst and Team Lead. Jody has been CAMS certification since 2007.  In her spare time, Jody enjoy reading, traveling and riding her motorcycle with her husband. 

Disclaimer: The opinions expressed by the author of this article, which are not necessarily the opinions of the firm, its other members or any of its other employees, should not be considered accounting, financial or legal advice.
Image courtesy of: www.upstream-advisors.com

 

Topics: Due Dilligence

  

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Professionals from BBP Partners will share their expertise and insights to assist law firms, corporations, lenders and public institutions with analysis, understanding and resolution of the complex financial issues they encounter. 

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