Ready to Buy?
7 Questions You Must Ask Before Buying CIP Software |
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Get your bank out of the dark ages with advice
from technology vendors |
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| Reproduced with permission from Eli Research, Inc., PO Box 90324, Washington, DC, 20090-0324, Copyright 2004. For subscriptions to Community Banking Compliance Alert, call (800) 874-9180. |
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| The federal “Know Your Customer” element of your Customer Identification Program (CIP) is no longer a suggestion to banks — it’s an order. The bad news: A customer who gets arrested for illegal financial activity may spell big trouble for your next compliance evaluation. The good news: Compliance software solutions offer some CIP help. |
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| To meet new challenges, more banks are turning to software programs specifically designed for this compliance. Given the array of CIP technologies available, ask these questions in your search for the best solution, straight from the mouths of the people who sell the products. |
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| • How Well Does the Technology Verify and Validate Data? These processes should be present and very solid within a good CIP product, states Debra Geister, a product manager with Charlotte, NC-based ATTUS Technologies. A quality verification tool will take each data element separately and cross-reference it against other information to make sure the entire data set belongs together. Another feature to consider is reverification, notes Clifford Hagler, CEO of Aquilan Group in San Antonio. Data reverification automatically checks data every time new information is added to your database, allowing for broader information sweeps. |
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| • How Extensive Is the Database? Vendors agree that you need an up-to-date database with as many individuals and businesses as possible to improve your chances of CIP success. “The more history you have, the more likelihood you can catch fraudulent activities,” notes Chuck Schardong, senior product manager at Pittsburgh-based Innovative Systems, Inc. |
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| • How Comprehensive Is It? Consider what other values besides compliance the product will give you, stresses Cleave Schultz, VP of Duluth, GA-based Penley, Inc. “The technology should be looking to expand to provide efficiencies for other aspects of account opening,” he says. |
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| • Does It Provide Flexibility? Products should offer flexibility not only in pricing, but also in structuring compliance functions, Hagler advises. CIP technology that tracks compliance information across your organization allows a bank to easily define workflow, he notes. |
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| • How Much Detail Do You Get? Another consideration to weigh involves the amount of detail you get. Some technologies return only a pass/fail score on a search, but it’s not always that simple, says Schardong. “I think a community bank should be concerned that they’re going to get enough details so they can determine an actual threshold of handling those records,” he notes. He suggests that a program that assigns a rank or score to the transaction may give the bank a better picture of the transaction’s risk. |
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| • What's Your Risk Assessment? “A bank is going to make a decision on getting a technology based on the risk for their institution,” Geister states. “With the new procedures from the regulators, they get a risk rating as far as any money laundering or Section 326 is concerned, and they need to set their procedures accordingly.” |
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| • Are You Getting Your Money's Worth? Pricing ranks high on the list of community banks’ concerns, according to vendors. When pricing out a solution, Schultz counsels asking if the technology provider will perform more than one compliance task. For example, a solution that simply returns a report on the information without maintaining a record of the data still leaves your bank the burdensome task of record retention. |
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| Smart Strategy: Before purchasing any solution, consider all the technology options available. “A community bank is not going to have really high volumes, so it’s going to be harder for them to negotiate based on volume pricing,”says Geister. If possible, don’t make an upfront investment, she advises. Also look at Web-deployed products initially. |
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| Whichever solution you pick, Schardong stresses that having a centralized repository of customer information is critical to preventing your bank from becoming the next target for fraudsters. |
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