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Customer Information Procedures
The USA PATRIOT Act compliance deadline is right around the corner. Is your institution ready? By October 1, 2003, all banks, credit unions, brokerages, and other financial services institutions must complete the following:
- Implement a written CIP appropriate for the size of the institution and the type of business
- Incorporate the CIP into the institution's existing Bank Secrecy Act procedures, which must be approved by the institution's board of directors.
- The CIP must include procedures for notifying customers about the new identity validation requirements. Sample language was published in the Federal Register, Section 103.121 (5) (iii), and can be used by financial institutions to meet their compliance obligation:
Important Information About Procedures for Opening a New Account
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means for you: when you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.
The following table contains a list of the procedures that must be in place by October 1, 2003.
| Section 326 Requirement |
Identity Validation
The FI must establish risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable. The procedures must specify the identifying information the FI must obtain from each customer prior to opening an account and at a minimum contain the following:
- Name
- Date of birth (for an individual)
- Identification Number:
- For a U.S. resident, a taxpayer ID number (SSN, ITIN)
- For a non-U.S. person who does not have such a number, the FI may obtain an identification number from some other form of government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.
- Residential or business street address - If no physical street address, s/he may provide an Army Post Office or Fleet Post Office box number, or the street address of next of kin or of another contact individual.FIs are encouraged to obtain more than one type of documentary verification to ensure that it has a reasonable belief that it knows the customer's true identity. FIs are encouraged to use a variety of methods to verify the identity of a customer.
Additional Signatories
The proposed provision, which required verification of a signatory on an account, was eliminated when the final Section 326 regulations were released. Instead, the final rule requires an FI's CIP to address situations in which the FI will take additional steps to verify the identity of businesses, clubs, and other entities by seeking information about individuals with authority or control over the account, including signatories, in order to verify the entity's identity.
Record Retention
All basic identifying information (i.e. Name, Taxpayer ID number, Date of Birth, Physical Address), descriptions of any documents used, descriptions of any non-documentary methods used and the results, and resolutions of any discrepancies must be retained by the institution for five years from account opening. The customer's identifying information must be retained for five years after the account is closed.
Terrorist Screening
There is currently no "government list" for purposes of Section 326. When a list is so designated, it will be clear that it is a Section 326 government list. FIs' CIP must include procedures for determining whether the customer appears on any such list.
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Early Warning Systems Boilerplate (formerly PPS)
For over a decade, Early Warning Services, LLC (formerly Primary Payment
Systems) has been an industry pioneer by facilitating cooperation and
information sharing among financial services organizations as a
best-practice means to help prevent fraud losses and safeguard the financial
assets of those organizations and the consumers they serve. A suite of
services delivers this intelligence to where it is needed most resulting in
billions of dollars in loss avoidance each year.
For more information, please visit www.early-warning.com.
First published on BankersOnline.com 9/8/03
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