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KYC to CYA… 4 Steps to avoid 90% of frauds

Before you jump to conclusions…CYA refers to Cover Your Assets! And KYC refers to Know Your Customer.

Gerald Dent, RMA Chair, puts some great practical wisdom in his RMA Leadership Letters found in the front pages of each RMA Journal. Here is the abbreviated list for this tried and true defense against fraud.

  1. Ask for identification if you don’t personally know the individuals signing documents. Meet them all.
  2. Visit the borrower’s place of business when the borrower is present.
    1. Inspect the property.
    2. Meet key employees.
    3. Talk with the owner about their plans. (They’ll like that!)
  3. Never communicate through an intermediary, like the corporate accountant, on important aspects of the credit.
  4. Don’t take shortcuts to meet production goals.

It turns out that one of the most important tools to spot and avoid fraud is also one of the most important tools to develop and strengthen borrower relationships…Know Your Customer.

The 90% in the blog title is Mr. Dent’s guess…what do you think? What other ideas do you have for knowing your customer?

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.