If your opening an account for a broker, am I correct in saying that we would not use documentary id methods since they are not a person?

I do not believe you are correct. You would obtain documentatry and non-documentary information (as defined in your CIP) and verify the identity of the broker.

Remember that the definition of a person includes not only naterual persons, but also includes entities such as corporations, partnerhsips, foundations, trusts, etc.

Do you mean a deposit broker? If so, here is an excerpt from the preamble to the rule that addresses them:

"In the case of brokered deposits, the ‘‘customer’’ will be the broker that opens the deposit account. A bank will not need to look through the deposit broker’s account to determine the identity of each individual sub-account holder; it need only verify the identity of the named accountholder."

I need to BUMP this up.

Ok, I understand that the broker is the "customer", but the account is not in the brokers name it is in whoever the broker opened it for. Once the account is opened we deal strictly with the named account holder.

Who would we need to identify and verify then???

BUMP

i am more confused. We do broker CD deposits. the broker calls or faxes us the information. the account is in the name of the individual or business (if a businees).
we are not going to ask for copies of documents in this case. we will probably SEND A THANK YOU LETTER AND MAYBE A REVERSE PHONE/ADDRESS.

BUMP

OK! I'll give it a whirl. My suspicion is that this is a question that no one really knows the answer to, and won't until we get some official guidance that addresses this.

However, here is my best guess. I think this may be another example of how little the people who write these rules seem to know about the industry they regulate. What you describe, which is where the broker initiates the contact with the bank, but the individual customer is actually the account holder, is I think the norm. That is certainly the way it was done in the 3 different banks I've worked. I may be misunderstanding what is being described in the preamble to the rule, but I have never seen a scenario in which the bank holds an account for a deposit broker and the deposit broker has sub-accounts which identify the actual owners of the account. My experience is limited though, and so maybe that is a normal way to do it.

Anyway, here's my guess. If you have an account in the name of the broker, you have to identify the broker. If you have an account in the name of some other customer who happened to be brought to you by the broker, but who is now the individual with whom you communicate, that customer is your customer and you should identify the actual customer.

Now, it is possible that a deposit broker is covered by the rule somehow (I haven't researched that question) and if so, you may be able to rely on their CIP, but I'm guessing that you do have an obligation to identify the actual customer.

Anyone else agree / disagree?

Great Blue - I haven't researched this question in alot of detail, but tend to agree with your comments, based on the way the Broker industry works. I believe under the recent regulatory guidance onPredatory/Abusive lending you would be required to do third party due diligence on the broker; and then any customers they bring to the bank as well for CIP.

There is one other type of deposit broker. They are usually major institutions such as Merrill Lynch, etc and they place deposits with the bank - usually several million dollars - made up of deposits from many different customers. I think that this is the scenario that the regulation is trying to cover.

We have both types of accounts - we will be IDing the Merrill's of the world and then requring the other brokers to ID the customers and we will contractually rely on that ID and then run ChexSystems on them.

My view on this is quite different. According to 326, regulated financial institutions covered under the PATRIOT Act, such as brokers, would not have to be "CIP"ed as an entity. Now if these brokers are opening accounts on behalf of retail clients at your firm, and you have no contact whatsoever with their clients, in my opinion a third-party reliance agreement between your firm and the broker would suffice. The broker is required, under the Act, to adhere to the regs themselves, so they would have had to CIP them before bringing their client to your institution.