Customer activity reviews: An integral component of the due diligence process

Overview

The US Treasury Financial Crime Enforcement Network’s (FinCEN’s) Customer Due Diligence Rule (“CDD Rule” or the “Rule”), effective May 2018, codified customer due diligence as the fifth pillar of the AML program and required covered financial institutions to have “appropriate risk-based procedures for conducting ongoing customer due diligence.” Recently, we’ve observed several financial institutions (FIs) facing increasing challenges in conducting an analysis of a customer’s expected activity compared to its actual activity (expected versus actual, or EVA).

Guidance from FinCEN on the CDD Rule confirms that EVA analysis is an expectation of the rule, and explains that the information collected at account opening is essential to developing a customer risk profile. The Guidance states that EVA should be used to “Develop a baseline against which customer activity, such as the customer’s expected use of wires or the typical number of deposits in a month, can be assessed for possible suspicious activity reporting.”

This Financial crimes observer provides six tips that FIs should consider when designing and implementing their EVA customer activity analysis.