Risky business: Every customer is different

When it comes to money laundering (ML) and terrorist financing (TF) risk, potential members are not created equally. In fact, there are certain professions or businesses that have been identified by federal regulators as possibly requiring more in-depth Bank Secrecy Act (BSA) compliance processes, such as marijuana related businesses (MRBs), private ATM ownerspolitically exposed personsnonprofit entities, and more. Some risk-averse credit unions have decided to avoid doing business with such potential members to avoid the additional BSA compliance burdens that could accompany their membership. Over the last several months, however, the federal financial regulators have encouraged credit unions to take a different approach.

In December 2021, the Federal Financial Institutions Examination Council (FFIEC) updated their BSA/AML Examination Manual to add a new introduction on customers. We’ve previously blogged about this development here. This new section reminds examiners that “no specific customer type automatically presents a higher risk of ML/TF or other illicit financial activity.” Instead, the guidance instructs examiners (and credit unions) that the level of risk will vary from one customer to the next and will depend on a number of factual circumstances rather than the specific “type” of customer or their line of business. The guidance also states: “The federal banking agencies and FinCEN, encourage [credit unions] to manage customer relationships and mitigate risks based on those customer relationships rather than declining to provide banking services to entire categories of customers.” Thus, the federal regulators – including the Financial Crimes Enforcement Network (FinCEN) and the National Credit Union Administration (NCUA) encourage credit unions to manage their customer relationships and to take steps to mitigate the BSA risks posed by each potential member, rather than having a policy of outright denying membership to certain types of customers or businesses. The updates to the FFIEC manual also made similar comments in other sections of the manual.


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