Anyone out there participating in the CDARS service? This is the "deposit swapping" service that allows a bank to take deposits over $100,000 and place them with other banks in order to get full FDIC insurance coverage for the deposit.

CDARS is an ABA endorsed product, and there are many ex FDIC and OCC officials that are with the company, Promontary, that offers this product.

However, IMHO they do seem to be dragging their feet in effectively addressing CIP issues between all of the participating banks. At one point, they said these are "brokered" deposits and so banks don't need to worry about CIP. Then we were told that as long as we had a letter from Promontary stating all participating banks are members of FDIC and have a fully functional regulator, we would be fine.

But now, Promontary came out with revised agreements for each bank to certify compliance with every BSA statute EXCEPT Sectrion 103.21 which is the CIP.

AARRGGHH! Anyone out there have better results?

I believe the contract states that the relationship bank has the responsibility for CIP. Other banks are shielded and the customer has no contact with them.

Well I finally saw a legal position that CDARS will be issuing on the subject of CIP. The difficulty I saw is that, in theory everyone agrees that each bank should take care of its own customers - BUT when you've got a BSA-sensitized exam team going through the regulatary requirements with a very fine-tooth black-and-white comb, those "understandings" seem to evaporate.

I don't understand how CDARs works exactly, but I have gotten the idea that it's really a deposit brokerage or something substantially similar? If it is, then CIP requires that you ID the broker, but it is the broker's responsibility to ID the customer.

Bonnie, I agree that the problem then becomes explaining the regulation to the examiner.