CIP - Businesses

We are an institution that is within the Top 25 of the largest institutions. Now that CIP is in effect, we are noticing variances in CIP practices (according to LOB sales groups). Due to the challenges of the risk assessment and the footnote (Federal Register preamble) regarding the emphasis on the identity of the individuals establishing accounts for entities or non-individuals, we made the decision to perform CIP on the business and the individual (for small and medium size companies). This helps us mitigate fraud risks, such as account takeover and identity theft. However, as I mentioned, we are receiving feedback that our competitors do not have the same standards and that this is hurting our sales efforts. I am throwing the question out to the group - are we truly that unique? Is your institution obtaining the identity of only the individual? I understand that this question may prompt numerous anonymous responses, but would like to get a sense of whether anyone went down the same path as we did.

For businessess we are obtaining a copy of their Articles of Incorporation and verifying with the Secretary of State that they do exist and are in good standing. We also identify all signers on the account.

I, too, have heard that not all banks are doing it the same way - which is true. For me it doesn't matter what the other banks are doing - just that we are in compliance with the regulation.

We verify account signers as well as the business entity. Do you really know your customer if you don't know the account signer? This has been our policy for a number of years. It was initiated to reduce losses related to fraud.

We also verify the signers and the entity. We have done this for several years. There is just less "wiggle room" now that we've implemented a CIP. Of course, I've been told for years that the proverbial bank down the street doesn't require documentation or information for any thing (POA, death certificates, SSN's - you name it).

We verify the identity of the business entity and of the individual signers. I've also been told that "none of the other banks are doing this", but I think it's a good practice to reduce fraud. Actually, most of the argument that has come up regarding this or any other part of CIP has come from senior management. The front line staff who has to actually apply the program working with customers seems to just be dealing with it without major problems.

We also identify all signers and the business itself. This has been our practice for a number of years for deposit accounts, but on business loans, we had only been identifying the principals and/or guarantors. We have now extended the deposit policy to cover loans as well, in part because it makes it easier to have one policy instead of two and because if the loan officer refers the businews to open a checking account, we ultimately have to get it anyway.
BC

Well, I guess I work for "all the other banks" that are not performing CIP on the account signers. We obtain the docs required for establishing the account and do non-doc verification. But we are not requiring the signers to provide information.

Our bank has experienced losses due to fraud committed by signers on business accounts so - yeah - you bet you ID the signers on business accounts. We also run a ChexSystems on business account signers, and we do get a lot of flak from potential customers because we need them to sign an authorization before we can do so.

Next set of FAQ's for staff may have to include the dollar amount of losses from fraud and legal complications that we've been hit with because we didn't do enough "due dilligence" on our business account signers. At the end of the FAQ, perhaps we should say "And this money comes right out of the pool for Incentive Pay!"

Don,

I assume that your risk assessment compliments your current policy.

We are a mid-size regional bank with 40 branches. We have chosen to identity authorized signers (always have) as a means to protect the bank. We want to know our customer. In addition, some of our branches are located in HIFCA areas.

I just wonder how examiners will look at similarly situated banks. It will be interesting to see if they will make recommendations to banks like Don's to enhance their CIP.

I would be interested to see a poll on this, but I don't know how to do it. I'm sure someone can improve on the categories below.

Categories:

We do not ID authorized signers.

We ID authorized signers.

We ID authorized signers only for certain businesses.

Bonnie,

Excellent job. Would it be possible to make a couple more changes? Could you revise the categories to simply state signers and then add a category incorporating the Federal Register footnote:
For non-individual accounts, you are identifying the individuals with ownership or control over the account (e.g. principal owners, those authorized to open the account).

I would need to create a new poll. Once you use the Poll feature, you cannot edit a post.

Would you be willing to share the language you use for pulling a consumer report on authorized signors? Thank you.