Handling Major Headaches: "Knowing Your Customer" in Cyberspace

Article excerpt

The Federal Reserve Board has been developing regulations that would require financial institutions to establish "Know Your Customer" policies and procedures. This is meant to assist law enforcement agencies in better identifying money launderers and potential money launderers. With a growing number of people doing their banking via computer or phone, banks will need to ensure that their cyberbanking unit maintains compliance with the Know Your Customer guidelines.

Although the regulation has not been published, some of the issues banks will have to face are already becoming clear. This month, we have suggestions from Bank of America's Bryan Kroll, senior compliance analyst and division compliance officer for BankAmerica's Interactive Banking Division. Kroll has compliance responsibility for the bank's Internet site content; telephone and PC bill payment products and services; as well as other emerging compliance and technology issues.

Cyberbanking promises benefits to both consumers and banks. However, systems and controls need to be in place to help banks identify and report potential money laundering to law enforcement agencies. Whatever policies and procedures your bank establishes to comply with Know Your Customer guidelines, make sure that the policies and procedures are well documented and that they are adopted by your cyberbanking unit to fit its business needs. Here are two key points:

Ability to identify all the bank's customers This is the most difficult piece to manage in a cyberbanking environment, because your bank may only interact with a customer through an electronic medium. …