I am in deep discussions about the interpretation of CIP and business accounts.

Scenario: If an individual walks in to open a business account for a corporation, who do you CIP?

The Reg states that you CIP a "customer" who opens a new account. A customer is a "person" and by definition that means an individual, corporation, partnership or trust. By definition the customer would be the business and according to the Reg that is who you identify unless you are unable to identify the business then you identify the signers or persons with control or authority over the business. Of course, unless you state in your CIP Policy that you do CIP on your signers. The account belongs to the business not the individual.

I am a bit confused with the person that I am discussing this with because they state that you do the business and the individual but I just can't see in the Reg where that is written. Has anyone else seen this interpretation?

Does your organization have a CIP policy? I would suggest going there for further interpretation as each organization's policies will differ slightly. My institution CIP Policy states we will collect information on the entity as well as signers on business accounts. If we can't identify the business our policy is to not open the account as that would contridict our policy on CIP. Does that make sense or did I confuse you more?

The entity is the customer, but most banks have chosen to state in their policy that they will CIP both the entity and the signers.

Yes that makes sense. Our policy states that we CIP the business and if we are unable to then we will verify the signers. I have someone telling me that we are required by the Reg. to identify not only the business but the person opening the business. I am trying to figure out where in the Reg. it states that we have to identify the business AND the individual that opens the account on behalf of the business. I just don't see it in there. I know in the proposed Reg. it stated that but when the final Reg. was released that requirement was deleted. Thoughts?

You are correct. The regulation does not directly require that you CIP the individuals opening the account for the business. However, take a look at 31 CFR 103.121(b)(2)(ii)(C), which reads:

Additional verification for certain customers. The CIP must address situations where, based on the bank's risk assessment of a new account opened by a customer that is not an individual, the bank will obtain information about individuals with authority or control over such account, including signatories, in order to verify the customer's identity. This verification method applies only when the bank cannot verify the customer's true identity using the verification methods described in paragraphs (b)(2)(ii)(A) and (B) of this section.

It sounds like your policy is right on target. As noted above, however, many banks have taken the stance that they will CIP the individuals in ALL cases, out of a preponderance of caution. That position, if adamantly adhered to, can turn away some potential business (and non-profit) accounts, IMO.

Our policy states we CIP the entity and the individual opening the account. We do not CIP all signers anymore.

John, the interesting thing is that we do state in our policy that if the business can not be identified then we will identify the signers. Would you agree that it is unfounded for someone to take the position that it is required by law to identify the individual opeing the account on behalf of the business and the business? (unless stated in the CIP Policy) Thoughts?

Yes, gluefriend, I would agree. But we need to accept the fact that what's in a CIP policy is the "law" at that bank (as long as it at least meets the regulatory requirement), and that there's plenty of confusion out there as to the difference between the regulation and a bank's own policy.

Frankly, other than the satisfaction of winning a debate on the issue, I don't think the difference is really worth splitting hairs over.

One more thing, would you agree that it is a choice for FI to identify the individual opening an account on behalf of a business or not to identify them? Simply put, you are not violating the Reg. if you decided, based on your risk assessment, to identify only the business and not to identify the individuals opening the account for the business as long as you have addressed in your policy situations where additional verifications would apply. I appreciate your thoughts..

I believe that is exactly what the regulation says.

However, where banks have gotten into trouble is allowing their frontline staff to make these decisions when the board's approved CIP program doesn't provide for discretion. There can also be problems when the approved CIP program provides for discretion, but it's not handled well.

An example of the last statement would be a scenario in which a purported non-profit organization cannot provide adequate documentation of its legal existence, but the new accounts desk figures she doesn't really need to CIP the principals because, after all, "what harm can there be in opening an account for a non-profit?"