Rollover IRAs and CIP

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Question:

Automatic Rollovers and IRAs - CIP implications. There's a footnote on page 5 of the guidance issued under IRS Notice 2005-5 regarding automatic rollovers. CIP compliance on the IRA seems not to be immediately required at establishment when it is an automatic rollover, and says that institution will not be required to implement its CIP until the former employee first contacts such institution to assert ownership or exercise control over the account. Industry wide - any guidelines on what to do if the "account owner" never asserts ownership or whether within a certain timeframe after account establishment you become responsible to find them to secure CIP requirements? (I don't exactly trust the footnote) I envision accounts established for "lost participants" who I will be hard pressed to fulfill my CIP requirements.

Answer:

I would agree with your hesitation on trusting this guidance. Technically, this individual is now your customer and must be properly identified (at some point). To help eliminate risk, it might be safer to apply CIP once the funds enter your institution. By requesting the necessary information in the beginning, your institution can have comfort that you will (1) know the customers identity, and (2) avoid potential conflict with your regulator.