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#87926 - 06/13/03 01:33 PM CIP- Restricting account use
JacF Offline

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PA
Just trying to get the wheels turning on this rainy Friday morning (I'm still on my first cup of coffee.)

How is everyone approaching restricting the use of an account when id information is incomplete/incorrect? I'm trying to develop a set of restrictions based on the type of account and the nature of the missing/incorrect information. For time deposits, this is fairly simple (no redemption until we get all id info.) But checking accounts (especially joint accounts) are posing quite a headache. Rejecting checks signed by an unverified owner would create an operational nightmare (not to mention a sour customer.) So I'm leaning more toward not issuing debit cards, online banking id, etc. to those with missing information. But then that allows customers who don't use those services anyway to skirt the CIP requirements. It may just be the way I read the reg, but this seems to be the biggest gray area in CIP. Thoughts?


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#87927 - 06/13/03 01:38 PM Re: CIP- Restricting account use
Nanwa Offline
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Clintonville, WI, USA
We simply state, if you do not give us the information, we will not open the account. We had one situation that we opened an account, could not verify employment information and immediately closed the account. We are not going to mess around. Grrr!
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#87928 - 06/13/03 01:52 PM Re: CIP- Restricting account use
JacF Offline

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And that's the stance we're taking for in-person account openings, too. But when we get into joint accounts (with one owner present for opening) and accounts opened by mail, it gets a little trickier. Also, I'm considering situations where we use a positive id verification service, and some of the information comes back as a mismatch. (These inquiries are done the day after the account is opened.)

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#87929 - 06/13/03 01:58 PM Re: CIP- Restricting account use
Bear Collector, CRCM Offline
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District of Columbia
We have discussed this, and while everything at this point is subject to change, we have decided that if someone comes in alone to open a joint account and does not have all the necessary information (name, DOB, address, TIN) we will either open the account as a sole owner account for the person who is present and add the secondary signer once the information is received, or we will refuse the account. As long as the person has the required 4 pieces of info for the missing person, we will open it jointly, because we can rely on non-documentary verification for the secondary signer. This will only be the case for lower risk accounts. For high-risk accounts, like check-cashing companies or money transmitters, we may be more restrictive and require both identification AND verification prior to opening the account.
BC
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#87930 - 06/13/03 02:38 PM Re: CIP- Restricting account use
Starky Offline
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A presenter at a seminar I attended suggested using Reg CC holds on new accounts. This will delay the use of the funds at least for a few days.

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#87931 - 06/13/03 02:40 PM Re: CIP- Restricting account use
rlcarey Offline
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Galveston, TX
Oh please - that is far from a sound policy and is not the intended use of Reg CC. What are you going to do about cash deposits and next-day items under $5,000?
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#87932 - 06/13/03 03:00 PM Re: CIP- Restricting account use
Starky Offline
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Sorry, just a suggestion given at a seminar.

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#87933 - 06/13/03 03:18 PM Re: CIP- Restricting account use
rlcarey Offline
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Galveston, TX
The "oh please" wasn't directed at you Lewis, but at the seminar speaker. I find it appalling when "experts" get in front of a class and make such statements.
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#87934 - 06/18/03 12:45 PM Re: CIP- Restricting account use
upstateNY Offline
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New York State
1. Lets say all information provided has been verified under our CIP Program, except the customer is applying for a TIN. We obtain proof of the application for a TIN. We conduct our risk based analysis and open the loan. Now, if after a reasonable period of time, the customer has not produced the TIN, aren't we required to close the account? How do we close a loan account?
2. Also, please help me understand the definition of "signatory". I have read and re-read the threads covering this, but I am still confused. Co-applicants, co-signers, guarantors(?), co-makers, are covered. Does signatory only apply to those authorized under a corporate resolution, or similar dicument, to conduct transactions for a business?
3. Just curious - If readers would be so kind as to respond - I'd like to survey as to how many banks are going to use an outside vendor for ID verification, vs leaving it to the subjectivity of the account servicer. Could you also give me your approximate asset size? NOTE: I'm not asking for the name of the vendor(unless you are comfortable in disclosing). Thanks everyone.

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#87935 - 06/18/03 12:49 PM Re: CIP- Restricting account use
Anonymous
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We have been documenting all signers on commercial accounts for some time and we plan to continue.

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#87936 - 06/18/03 01:12 PM Re: CIP- Restricting account use
Anonymous
Unregistered

Quote:

The "oh please" wasn't directed at you Lewis, but at the seminar speaker. I find it appalling when "experts" get in front of a class and make such statements.




You know, sometimes presenters are not putting themselves forth as "experts." I don't know anything about this particular situation, but I'm just a day-to-day compliance officer like many of you here. Sometimes I'm asked to give presentations at meetings outside the bank (and I usually accept).

I think we should give this poor guy or gal a break. When you're trying to answer a tough question about a brand new regulation, sometimes you just throw out possible ideas. I think the Reg CC hold idea is a valid option and does not circumvent adequate controls. This represents the creative use of the provisions of one regualtion to help you comply with another.

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#87937 - 06/18/03 01:17 PM Re: CIP- Restricting account use
JacF Offline

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Even before CIP, placing a hold on a new account deposit was a good idea, and it still is. The value of placing a hold in this case is to ensure that the account is not used while you complete your verification process. Using a hold as the sole means of restricting account use in this case is too weak, though.

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#87938 - 06/18/03 01:24 PM Re: CIP- Restricting account use
rlcarey Offline
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When I see the words "a presenter at a seminar", I immediately think that the person "paid" to go to it. If that is the case, then the presenter should be required to be an "expert". I'm still not sure how delaying the availability of funds is going to help you with your customer identification efforts. You can't delay cash deposits and that's how you launder money.

What it comes down to is that if the customr in front of you doesn't present adequate identification to meet the risk profiles you have developed - you don't open the account - period.
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#87939 - 06/18/03 01:49 PM Re: CIP- Restricting account use
JacF Offline

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Quote:

What it comes down to is that if the customr in front of you doesn't present adequate identification to meet the risk profiles you have developed - you don't open the account - period.



I think that's the way most of us have been doing business for quite some time, and I certainly agree with that statement. My intention in starting this thread was to address customers who are not present at the time the account is opened, and to brainstorm some guidelines on restricting account use in such cases.

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#87940 - 06/18/03 02:03 PM Re: CIP- Restricting account use
rlcarey Offline
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I have seen institutions struggle with the joint account - one person present - issue for many years prior to the new CIP rules. I have always recommended the following:

1. Either (a) don't open the account, or (b) only open it as a sole owner account and only issue the starter kit checks. When the other owner comes in or if the original person returns, obtain the required information as required by your policy based on your risk analysis and add the second signer to the account. Order the joint checks.

This never has been a very customer friendly approach and it has always been a hard sell, but in today's times, customers are going to have to realize that there are rules in life and once we verify that "you are you" we will bend over backward to ensure that they receive the service they deserve.
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#87941 - 06/18/03 10:20 PM Re: CIP- Restricting account use
Anonymous
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Quote:

When I see the words "a presenter at a seminar", I immediately think that the person "paid" to go to it. If that is the case, then the presenter should be required to be an "expert".




Ah, but there's the rub. Have you ever participated in a steering committee that is resonsible for scheduling speakers at a paid seminar? It's not always an easy thing to accomplish. Many times we end up using local compliance officers as speakers. Most of us do it to provide recognition for our institution and for the good of the profession and the industry. Anyway, I'm not sure that anybody is a "CIP Expert" yet. I know I wouldn't volunteer to be painted with that color!

Quote:

I'm still not sure how delaying the availability of funds is going to help you with your customer identification efforts. You can't delay cash deposits and that's how you launder money.




I agree that a new account hold is not the best choice, but it is a choice. There is more to laundering money than making deposits. You also have to be able to get it back out so that you can layer and integrate.

I'm making an assumption that if we did not get the required information, we would close the account. If that is case, we wouldn't give the money back until we closed the account. OK, so you could argue that layering has now occured; and you'd be right. But perhaps the offset would be for the bank to file a SAR.

Again, I would never advocate Reg CC new accounts hold has an adequate control, but the CIP regulation clearly anticipates that there will be situations where some banks may choose to establish the account and perform a verification after the fact. In that case, a Reg CC hold might prove to be a valuable tool to supplement and enhance the process.

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#87942 - 06/18/03 10:57 PM Re: CIP- Restricting account use
rlcarey Offline
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Anon - No real disageement from me - very well said . As you can tell I sometimes have a tendency to stir the pot. I think it helps sometimes to get ideas and concepts fully developed. Especially when your talking about regs as new as CIP. Thanks for the discussion.
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#87943 - 06/19/03 04:31 AM Re: CIP- Restricting account use
JacF Offline

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Quote:

Anyway, I'm not sure that anybody is a "CIP Expert" yet



Well, when we're ready to designate the experts, I'd like to nominate Ken Golliher and Ted Dreyer for the title. Both of these posters have provided some very clear insight into this otherwise muddy reg.

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#87944 - 06/19/03 02:19 PM Re: CIP- Restricting account use
Anonymous
Unregistered

Quote:

Anon - No real disageement from me - very well said . As you can tell I sometimes have a tendency to stir the pot.




Thanks for the compliment. And as you can tell, I also am somewhat of a pot stirrer myself. I think stirring the pot keeps us sharp. (Blink, blink.)

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#87945 - 06/19/03 04:07 PM Re: CIP- Restricting account use
Ted Dreyer Offline
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Thanks, JacFSB. The fact that Ken and I each do webcasts on CIP has required us to focus on the issue.

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