To Ask or Not to Ask: That is the Compliance Question

Thanks to Sir William Shakespeare, the long-pondered question, “to be or not to be” has been applied to many situations. When you’re tired but busy, you might ask yourself, “to sleep or not to sleep.” When you want to make an expensive purchase, you may think, “to buy or not to buy.” But in the world of compliance, there is really no room for a Shakespearean debate...the answer is most certainly to ALWAYS ask the questions.

So why is it that credit union staff shy away from asking members questions? What’s so stressful about confirming their identity or the validity of a high dollar transaction? The conundrum is many credit union staff look at these questions as bothersome to members. But let’s look at them for what they really are. Sure, some of them are a required, but, in the end, they are a quick and easy way to protect the members, the staff and the credit union from fraud and other risks. No one on either side wants to deal with loss due to fraud later on down the road, right?

Try to reframe your organization’s outlook and approach to compliance and due diligence. Remember that the ultimate goal is protection of all parties. In this light, not every question needs to be a confrontation. Not every request for documentation needs to be a burden for your staff or your member. Knowing what to ask and working on how to ask can make the process more comfortable for everyone.

Make Asking Questions the Norm

From the very beginning, let it be known that questions are just part of the normal process of banking with your credit union. After all, identification is a large bulk of the requirements for account opening. So, when your staff asks for social security numbers, phone numbers, addresses, driver’s license information, etc., make the member aware that this a common practice and may be used to verify his or her information for security in each and every transaction.

In addition to demographic information, knowing a member’s employer and how they generally receive compensation is helpful in determining unusual activity. If your staff asks these questions during account opening, you know what kinds of transactions to expect and what kinds can be signs of fraud. For example, if your member receives a bi-weekly ACH payroll deposit and he or she brings in a work check in paper form, it might raise some red flags. This, in turn, will lead to more questions to determine if the member switched jobs, if the check makes sense, if the issuer of the check is local and so on.

In another instance, a member might be traveling, and purchases in another state could cause their debit/credit card to be flagged and blocked for unusual activity. Feelings of anger and frustration on the member’s end can be avoided if it’s a common practice to request notice of travel activity beforehand.

The bottom line is simple… the more familiar members are with the process of asking questions, the more comfortable they will feel.

When Asking Questions is Most Important

Not every encounter needs to be a redundant “would you like fries with that?” kind of situation. There are, however, certain scenarios where a little extra due diligence is required to reduce risk.

Offsite Banking

Now that we are living in a more mobile world, fewer members are flocking to branches for deposits, withdrawals and other interactions. More often than not, activities are being completed in a manner where there is no face-to-face contact – instead, they are overwhelmingly moving to online, mobile app and phone transactions. In these situations, identification can become more complicated. Therefore, asking questions becomes an even more critical piece of the puzzle. Be sure to use easily verifiable information when completing transactions which are not handled in person. In these situations, you need to do everything in your power to ensure you are actually dealing with your member and that they understand the nature of the transaction. Communication is key here, so having accurate email addresses and phone numbers, along with specific procedures for collecting information, is vital in validating the transaction.

Suspicious Activity or Current Transaction Reports

The same can be said if you need to complete a Suspicious Activity Report (SAR) or Currency Transaction Report (CTR). Say you’re processing a loan application for a member, which means you’ll need to verify information. If supporting documentation doesn’t match the information on the loan application, you’ll want to clarify the discrepancy in a non-accusatory manner. The discrepancy may just be an honest mistake, or it could be the member trying to submit fraudulent information which could mean losses for your institution. In many cases, contact information is critical, as you may have a disclosure or notice of held funds to send as you complete your reporting requirements. By simply verifying that a member has the same contact information with each interaction (normal or otherwise), it won’t seem so daunting and frustrating.

How to Approach Due Diligence with Staff

Although there absolutely needs to be a focus on familiarizing members with questions, providing a level of comfort for staff is important, too. To do this, approach the topic of due diligence as a team. Make it a regular discussion and share ideas on how to put everyone at ease with this important task. For some, it may come naturally to ask questions without making the members feel uncomfortable or even realize they are being asked. For others, it’s not. Together, your team can learn and share techniques or tips during staff meetings or training sessions.

Transparency is the best policy when it comes to due diligence and asking questions. If your members consider that having complete and accurate information on file is for their protection, they may be more receptive to providing that information. By the same token, if your staff realizes they are protecting the member and your credit union from potential risk by being proactive and speaking up, they will learn to incorporate questions into their daily interactions. No offense to Shakespeare, but the existential discussion on whether to ask or not ask doesn’t apply when it comes to due diligence…go ahead and ask those questions without hesitation!

Cindy Hagan works as the compliance administrator for Vizo Financial Corporate Credit Union. In this role, she administers and coordinates the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) program within the organization to ensure compliance with federal regulations, the NCUA and the industry standards of the FFIEC’s BSA/AML examination manual. She also provides compliance consulting and training services to credit unions.