Risk-Based Approach To Assessing Customer Relationships And Conducting Customer Due Diligence With Deborah Arndell

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Today, we discuss NCUA Letter to Credit Union's #22-CU-08 Risk-Based Approach to Assessing Customer Relationships and Conducting Customer Due Diligence with returning guest Deborah Arndell, President of ARMOR Advisory Services.

The National Credit Union Administration (NCUA), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the U.S. Department of Treasury's Financial Crimes Enforcement Network have prepared a statement. It clarifies the long-standing position that banks and credit unions must take a risk-based approach to assess individual customer risk. The attached joint statement reinforces the NCUA's position that no single customer type automatically presents a high risk of money laundering, terrorist financing, or another illicit financial activity risk.

The regulations established in the Bank Secrecy Act (BSA) establish a risk-based approach to assessing customer relationships and conducting customer due diligence. The NCUA expects credit unions to assess the risks posed by each customer individually. Further, the NCUA advises against refusing or discontinuing service to an entire class of customers based on perceived risk. Credit unions that comply with BSA and anti-money laundering (AML) requirements and have an effective customer due diligence program are well-positioned to manage customer relationships and risks appropriately, based on each customer relationship.

The Federal Financial Institutions Examination Council's BSA/AML Examination Manual (Manual) identifies specific customer types to guide examiners regarding unique characteristics. The Manual is not intended to suggest that those characteristics represent a higher money laundering, terrorist financing, or illicit finance risk. Ultimately, each credit union decides to provide or maintain financial services to any customer.

Don't hesitate to get in touch with your Regional Office or state supervisory authority if you have questions about this letter or the attached statement.