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Former Customer Opens Account, No CIP?

When an existing customer closes all accounts, and there is no active relationship, is there a stipulation that if the "old" customer returns to the FI and opens a new account within 12 months of all other accounts being closed, there is no requirement for CIP?

Answer by Richard Insley: Requirement or not, you need to know your customer. Wouldn't you be embarrassed if you later learned that during the 12 inactive months the customer had been abroad for terrorist training, or had done time for passing bad checks?


Answer by Ken Golliher: ...and a "previous" customer is not the same as an "existing" customer. If he used to have a million dollars on deposit and an unsecured line of credit for $250,000, but left your bank last summer, he's nobody in particular when he comes back; you perform CIP.

In addition to Richard's scenario, do you really want CSRs waiving identification requirements for someone who might just be bluffing his way into reopening an account that someone else closed?


Answer by Dana Turner: In many institutions, it's a common practice to "waive" physical identification requirements for "known" customers -- a big mistake. Account opening personnel will simply pull up the screen that contains the most recent data and -- after asking a couple of cursory questions -- will then use the existing information as if it was furnished today.

Who really knows a "known" customer? Ken's and Richard's examples are very good -- and it's still so easy to impersonate a customer. Insurance companies are examining claims much more carefully than they have in the past to determine if the institution was responsible for the loss in any way. Failure to identify account holders appropriately may cause a non-recoverable loss . . .

[Editor's note: Lest there be any doubt, the CIP regulations require banks to apply their CIP process when a new account is opened, unless the customer currently has an open account with the bank. See the CIP Q&A document from federal regulators, and look at question #2 on page 4.]

First published on 02/27/06

First published on 02/27/2006

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