I have encountered a case in which a bank opens a demand deposit account prior to the closing of a construction loan in anticipation of the loan proceeds distribution. CIP is not applied to the owners of the demand deposit account, but collected when the construction loan is closed. the demand deposit account is deemed open but not active. is this acceptable under CIP?

It is not acceptable for my institution. When an account is uploaded and appears on our mainframe, the CIP needs to have been completed and have no missing documentation.

CB30: The CIP regulation says that the required customer information must be collected "prior to opening" the account, but verification can be done "within a reasonable period of time after the account is opened".

We do things the same a NewTooBSA, if it's on the system, it's open. But I've run into Casey's problem with accounts being put on the system in anticipation of a loan funding. One of the arguments from the line was that the loan department needed the account number to put on the documents as a disbursement account.

Our solution is to "hold" an account number, provide it to the loan department then put it on our system at funding. Our new accounts system lets us have "pending" sessions allowing us to hold a number. If your new account system can do this, it might be a fix for you.

Or maybe you could seek approval to change your CIP program to reflect that "open" for your bank means "upon receipt of an activating deposit"... Don't know if that would fly or not.

The problem with booking the account without all the info is that is interferes with many traditional CIP tracking programs. You could create the appearance of having a very sloppy CIP program if examiners see accounts opened on a regular basis that appear to have been opened outside of the institution's CIP policies and procedures.

If you have an automated system triggered when the account is booked, I think you have two choices: 1) ask lenders to obtain identifying info earlier in the lending process (don't they usually have everything except maybe the DL number); 2) determine a way, as previously noted, to set aside an account number for the client until the info is obtained, loan closed and deposit account loaded onto your system.

CIP applies when a "customer" opens an account. Escrow accounts are generally opened by the bank not the borrower; CIP doesn't apply in this circumstance. While the borrower's name, TIN, and address are necessary for information reporting purposes, the borrower has no access to the funds.

In any case, the loan should show up on the balance sheet the same day the escrow account does and if CIP has been performed on the loan...

As Brenda notes, the practice is going to generate a lot of false positives in terms of apparent violations.