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The passage of Section 352 of the USA PATRIOT Act in response to the events of September 11, 2001, has motivated some credit unions to take a closer look at the effectiveness of their anti-money laundering processes. The PATRIOT Act does not require the use of software to monitor for suspicious activity, but regulators widely recognize its ability to effectively track and report money laundering. Just recently, the Swiss Federal Banking Commission passed an ordinance mandating that all of that country’s financial institutions, with the exception of smaller ones, must have their systems computerized to monitor transactions in order to identify unusual activity. It is possible that U.S. legislators will eventually follow suit. Trying to manually monitor unusual transactions or verify a new member’s identity is extremely difficult and time consuming, even for smaller credit unions with only one or two branches. Whether time is spent sending out thank you cards to verify addresses, making calls to new members to confirm phone numbers, or reviewing reports to discover structuring; the time spent can be better utilized serving the needs of your members. Automating your AML process will result in greater efficiency and productivity for your staff, and reduced risks for your credit union. Automating your process will allow you to most effectively: Identify your member’s true identity. The Federal Trade Commission (FTC) reports that 3.23 million persons were victims of new account and other fraud in 2002. The FTC also estimates that opening a new account when identity theft is involved costs your credit union on average about $10,200 per victim. Verifying the identity of a member not physically present at account opening, (e.g., an absent spouse, through the mail or Internet, or by phone) can be difficult and requires non-documentary identification using an automated system. Using a robust identity verification system as part of your AML program enables you to verify identity by accessing multiple databases and public records, and checking names against government lists. It also ensures your staff collects the appropriate information while speeding up the process at account opening. Know your members’ normal activity. Effective AML systems give you the ability to examine all business areas of your credit union and see the big picture of your members’ transactions. A member’s deposit, loan, cash, and wire activity may be monitored using profiles and dynamic parameters set by your credit union during a current period. Not only are you able to determine what’s normal for your members but also monitor your members’ cash transactions for potential structuring. Those members with potentially suspicious activity may be grouped by high, medium, or low risk by the AML solution. Some AML systems can also keep your board of directors in the loop by automatically generating status reports to notify them of filed Suspicious Activity Reports (SAR). This not only meets the notification requirement for your board of directors, but also enables them to make informed decisions when combating money laundering and terrorist financing. Generate the legally required reports. For years, some credit unions have struggled with the responsibility of manually analyzing pages of data to determine any required currency transaction report (CTR) and suspicious activity report (SAR) filings. Many of the AML systems offered today condense the related account information for you onto a single report, which allows you to more quickly and easily determine when you need to file a CTR or SAR. Some systems go as far as aggregating cash transaction records by account and member, and automatically filing the CTR with the Internal Revenue Service (IRS). This obviously provides a big efficiency boost. When evaluating your risks and determining your AML solution, keep in mind that between $100 billion to $300 billion is laundered in the United States every year. Globally, the estimates run about $1 trillion. The odds that your credit union will be used to launder money at some level could be fairly high. The fines for failing to prevent money laundering have increased and in some cases can be up to $1 million for any one violation by the credit union. Any person (whether it’s the manager of a credit union or a teller) who willfully violates the Bank Secrecy Act can be fined and possibly receive prison time. Despite these ominous warnings, credit unions are still understandably concerned about the costs associated with implementing an automated AML system. As a result, many of them are turning to outsourcing services to minimize those costs. AML outsourcing services provide experts that take care of your reporting and monitoring requirements, under the control of your credit union. These services enable you to satisfy your AML obligation, and at the same time minimize your up front out-of-pocket expense and need for IT resources. Remember, the most effective AML solution for your credit union requires that your policies and processes are efficient, the methodology and technology are sound, and your staff is well-trained. Even the most sophisticated system will be unsuccessful if your staff cannot properly use it nor understands their role in combating money laundering and terrorist financing. An automated AML solution, whether it is in-house or from a service provider, and well-trained staff will help your credit union efficiently reduce its risk, protect its assets, and meet the requirements of Section 352.

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