Has anyone heard of requirements to contact each customer that we do not have a SSN for each year? I have been told that we should be doing this regardless of the date the account was opened (pre or post CIP). I am trying to find out if this is true and if so what the exact requirement is.

Yes, refer to back-up withholding sections of the IRS codes.

These type of actions however will only apply to interest bearing accounts.

Doesn't the W8(BEN) have a 3 year validity? If so, why would we be required to contact the customer each year?

§ 103.34 Additional records to be made and retained by banks.
(a)(1) With respect to each certificate of deposit sold or redeemed after May 31, 1978, and before October 1, 2003, or each deposit or share account opened with a bank after June 30, 1972, and before October 1, 2003, a bank shall, within 30 days from the date such a transaction occurs or an account is opened, secure and maintain a record of the taxpayer identification number of the customer involved; or where the account or certificate is in the names of two or more persons, the bank shall secure the taxpayer identification number of a person having a financial interest in the certificate or account. In the event that a bank has been unable to secure, within the 30-day period specified, the required identification, it shall nevertheless not be deemed to be in violation of this section if (i) it has made a reasonable effort to secure such identification, and (ii) it maintains a list containing the names, addresses, and account numbers of those persons from whom it has been unable to secure such identification, and makes the names, addresses, and account numbers of those persons available to the Secretary as directed by him. A bank acting as an agent for another person in the purchase or redemption of a certificate of deposit issued by another bank is responsible for obtaining and recording the required taxpayer identification, as well as for maintaining the records referred to in paragraphs (b) (11) and (12) of this section. The issuing bank can satisfy the recordkeeping requirement by recording the name and address of the agent together with a description of the instrument and the date of the transaction. Where a person is a non-resident alien, the bank shall also record the person's passport number or a description of some other government document used to verify his identity. Here's a link to it as well.

This requirement to obtain a TIN applies to ALL accounts (interest bearing or not). It only applies to accounts opened prior to the CIP\ requirements of 10/1/03.

Is there a limit to the number of attempts to collect a SSN? We make an annual effort to go back and get missing tax IDs, but we're not making much progress. Can we stop trying at some point?

Also, what are the consequences of not getting all these tax IDs? If the consequences are severe enough, should we close consider closing the account?

If the accounts are not interest-bearing and they were opened before 10/1/2003, there's no consequence as long as you maintain a record of the name, address and account number of each such account that you can provide to examiners on demand.

Just be sure that you press the issue if any of these customers tries to open another account.

At our FDIC BSA exam last year I provided them with a list of pre-CIP customers who did not have a tax id number and they also told me I need to contact the customers on the list and obtain the missing TINs. You are not alone.

If you use the link provided by David Dickinson above and keep reading, it will give you the answer as well as exemptions.

The annual requirement to contact customers for whom you did not have a certified TIN on file emanated from the Internal Revenue Code, not the Bank Secrecy Act and was only applicable to interest bearing accounts. It ended several years ago.

BSA examiners are now asking for this (suggesting strongly, in writing) in the form of stating that banks must update info on longstanding customers. In addition to making sure you have TINS on all, including joint account holders. In addition, you need to have evidence that you are making an effort to obtain current info regarding ID (who recorded ID in 1965??), and current occupation. So, if you opened an account years ago, when the person was a teacher's assistant you need to have your people, on a best efforts basis, obtain current occupation, say when they next presented a check to be cashed at the bank. Have fun with this, I am!!

"suggesting strongly, in writing"

Did they happen to mention what this is based on?? If this some form of CDD they have suddenly made up?? In writing in the Report of Examination or some other form from a field examiner?

To add to John's comment; see CIP Q & A. It may help.

2. Can a bank open an account for a U.S. person that does not have a taxpayer identification number?

No, the bank cannot unless the customer has applied for a taxpayer identification number, the bank confirms that the application was filed before the customer opened the account, and the bank obtains the taxpayer identification number within a reasonable period of time after the account is opened. Note, however, that a bank does not need to obtain a taxpayer identification number when opening a new account for a customer that has an existing account, as long as the bank has a reasonable belief that it knows the true identity of the customer. A bank may also open an account for a person who lacks legal capacity with the identifying information, including taxpayer identification number, of an individual who opens an account for that person. (January 2004)

For some reason it has become abundantly clear to me in the last few weeks that most of the goofy things bankers attribute to their regulatory agencies were not in the written report. Bankers routinely turn offhand remarks or statements of personal preference by examiners into "directives" from the agency when, in fact, the agency is not to blame.

If an examiner wants you to do something you think is goofy just say, "Thanks for the advice, please put it in the written report so I can be assured of managment support," but raise Cain about it if it comes up in the exit conference. (If it doesn't come up in the exit conference, that's your first clue that it will not be in the written report.)

Again, the now lapsed requirement to request missing TINs annually came from the Internal Revenue Code, not the Bank Secrecy Act. As far as doing a "back and fill" operation on information for existing customers, the CIP regulation explicitly allowed the bank to exempt existing customers from CIP even when they were opening a new account. Any directive to methodically obtain information on existing customers who are not even opening new accounts, particularly consumers, is both wasteful and contrary to the express intent of the regulation.

Sometimes you have to stand up to the people who do not know the law and suggest you waste your time. I would worry about what a bank was not doing during the time it was carrying out such an exercise.

Ken, where can I find information showing that IRS changed this customer contact requirement?

I think that the regulators are focusing on the specific requirements still found in 103.34:

"In the event that a bank has been unable to secure, within the 30-day period specified, the required identification, it shall nevertheless not be deemed to be in violation of this section if (i) it has made a reasonable effort to secure such identification, and (ii) it maintains a list containing the names, addresses, and account numbers of those persons from whom it has been unable to secure such identification, and makes the names, addresses, and account numbers of those persons available to the Secretary as directed by him."

They may feel that an annual soliciation is reasonable.

Additionally, you will notice that the first two items in the standard request letter contains:

Customer Identification Program

_ List of accounts without taxpayer identification numbers (TINs).
_ File of correspondence requesting TINs for bank customers.

I have not been able to locate any guidance on the definition of "reasonable effort".

Lois,
The change was made several years ago when the IRS revised its regulations regarding what would constitue a reasonable cause defense for an incorrect TIN. In effect, the bank must make no more than two requests for a new TIN; i.e. send two "B Notices." The most prudent search you could do would be to attempt to locate a requirement for an annual mailing in current IRS regulations. It will not be there.

Randy,
An expectation of correspondence requesting TINs is in connection with CIP. Only banks whose CIP allows them to open an account for a person who has applied for a TIN, but not received it would reasonably be expected to have letters soliciting TINs. Per the regulation, all other customers must provide an identifying number "prior to opening the account."

Also the language in 103.34 is prefaced by: a)(1) With respect to each certificate of deposit sold or redeemed after May 31, 1978 and before October 1, 2003, or each deposit or share account opened with a bank after June 30, 1972 and before October 1, 2003, it does not apply to accounts opened outside that time frame. Again, the CIP regulations are specific about the bank's ability to exclude existing customers even when they are opening new accounts.

Any bank receiving a formal instruction about obtaining information about existing customers, particularly consumers, needs to stand up for itself.

Ken: "...goofy things...not in the written report"
At our last BSA exam, the examiners were very complementatry and we were not cited for any violations. At the BSA exit meeting the examiner handed out BANK SECRECY ACT FINDINGS. (Our regulators name and address are at the top. I understood this form to say do these things before we come back or we may cite you at the next exam.)
CUSTOMER DUE DILIGENCE
- Perform due diligence to obtain TINs for all customers with banking relationships prior to 10/1/2003 (not just primary account holder) to ensure adequate recordkeeping for future reporting. (I had provided them with a listing as they requested.) Are other FDIC institutions getting a findings report at the exit meeting? Are other institutions requesting TINs for all of their customers?

Under CTR, they also commented "Management may consider making additional Designation of Exempt Person (FinCEN Form 110) filings in an effort to reduce CTR (FinCEN Form 104) filing volume." We have a teller system which generates most of our CTRs, so I have not been adding to the Phase II exemption list. It is my understanding they can not cite me for this, does anyone believe otherwise?

I would request clarification from a review examiner or someone in the DC office regarding the first recommendation.

They most definitely cannot cite you for not filing Phase II exemptions.

Thanks for the specific information--this is very helpful and I'll pass it on to the department.

ksm,

Thank you...I just want to spotlight what you said and reiterate your request for feedback.



I accept the risks involved in sticking my neck out before you get any responses, but I think you have an examiner who aspires to being a consultant. Consider a letter to the regional office asking for clarification as to whether this is a direction from the agency or a simple expression of examiner preference.

Can you point me in the right direction to the document that states that we don't have to contact customers for whom we do not have a certified TIN on file.
We have had problems obtaining and keeping a file of customer without TIN and am in the process of cleaning that up and working on starting backup withholding on those account with no TIN. As long as we have one TIN on an interest bearing (pre CIP)account, is there any requirement to keep sending letters to obtain the missing TIN?

Following is an excerpt from IRS Publication 1586. It explains what you must do on an account with a missing TIN; i.e. no TIN at all or one that is obviously incorrect:

Missing TINs
A missing TIN is one that is not provided or is obviously incorrect. A TIN must have nine numbers. We consider a TIN missing if it does not have nine numbers, or if it includes an alpha character (a symbol other than an Arabic numeral). For payee accounts with missing TINs, you must:

 Complete an initial solicitation at the time the account is opened. The term “account” includes accounts, relationships, and other transactions. If you do not receive a TIN as a result of your initial solicitation, immediately begin backup withholding on reportable payments (under section 3406(b) of the Internal Revenue Code).

 Complete a first annual solicitation if you do not receive a TIN as a result of your initial solicitation, immediately begin backup withholding on reportable payments, by December 31 of the year in which the account is opened (for accounts opened before December) or by January 31 of the following year (for accounts opened the preceding December).

 Complete a second annual solicitation, if you do not receive a TIN or a valid TIN as a result of your first annual solicitation. You must complete this by December 31 of the year immediately following the calendar year in which the account was opened.

Earlier versions of the same publication required annual solicitations in perpetuity. The fact that the current version does not talk about annual solicitations beyond the first two should be enough to indicate that the Internal Revenue Code does not require them. It's simply not there anymore and I cannot "prove a negative."

Your institution was liable for backup withholding on all of these accounts if you did not receive an acceptable response to the first solicitation. (Receipt of B Notices would change the wording only slightly, but would begin backup withholding when the customer failed to respond appropriately to the first B Notice.) You are liable for the amount that should have been withheld whether you withheld it or not.

As noted above, if the account was opened after CIP took effect you were required to obtain an identifying number on each customer "prior to opening the account." If it was opened prior to then, you were only required by the BSA and the IRC to obtain one TIN and CIP did not/does not require you to go back and get another unless you did not exempt existing customers when they are opening a new account.

ksm has a situation where examiners have informally suggested that efforts to obtain the TINs on "old" accounts are necessary. If others have received similar directions we are hoping they will respond...

I am working on following up on the missing TINs. Do I need to contact customers who only have a safe deposit box? We strongly encourage our staff to get TINs for signers, but it is not required. Does this apply to signers?
103.34 says ...we need to secure a TIN of a person having a financial interest in the certificate or account. It is my opinion this does not include safe deposit boxes, signers or any one with fiduciary powers.
Consultants have told me they have seen some banks cited for not complying with this.

Everytime I think that I know something I find that it may not be true!!

I thought that per CIP we must have name, address, tax id, and date of birth for every new customer??? I know that I have read it on BOL. Where have I gone wrong?