When should a credit union ideally verify a member's identity?

Verifying a member's identity before they open an account is a critical step in ensuring compliance with the Bank Secrecy Act and other regulatory requirements. This process, known as "customer due diligence," is designed to prevent money laundering and other financial crimes by ensuring that financial institutions know who their customers are before establishing a banking relationship. By conducting identity verification prior to account opening, a credit union can assess the risk associated with a potential member and ensure the integrity of its operations from the outset.

This proactive approach helps in collecting necessary information, such as the member's name, address, date of birth, and taxpayer identification number, which is critical for monitoring and reporting suspicious activity later. Additionally, verifying identity at this stage ensures that all necessary documentation and compliance measures are completed before granting access to financial services.

In contrast, other options like verifying identity after the first transaction, during the annual review, or only when required by law do not provide the same level of preventive control. Waiting until after an account is opened or during routine reviews increases the risk of a financial crime occurring before verification, which could potentially expose the credit union to greater liability and compliance risks. Thus, the timing of identity verification before account opening is integral to effective risk management and regulatory compliance.