What is the best practice for when a credit union should verify identity?

Verifying a member's identity before opening an account is a crucial best practice in the context of anti-money laundering and Bank Secrecy Act compliance. This practice ensures that the credit union adheres to the “Know Your Customer” (KYC) regulations, which are designed to prevent financial institutions from being used for illicit activities. By confirming the identity of a member prior to account opening, a credit union can assess the risk associated with that individual and take the necessary steps to mitigate potential fraudulent activities.

Prior identity verification allows for the collection of important documentation and information that is essential for conducting due diligence, including proof of identity and address. It facilitates a more secure onboarding process and promotes a culture of compliance by ensuring that only legitimate members gain access to banking services.

In contrast, verifying identity after the account has been opened, during the first transaction, or at any point during membership misses the proactive approach necessary to prevent possible illegal activities from occurring. These alternatives do not provide the same level of security and risk management, making them less effective in protecting the institution and its members.