(2) The Bank`s non-documentary procedures shall address situations where a person is unable to produce an unexpired government-issued identity document containing a photograph or similar guarantee; the bank is not aware of the documents submitted; the account is opened without receipt of documents; the Client opens the account without going to the Bank in person; and if circumstances are otherwise presented to the Bank that increase the risk that the Bank will not be able to verify the true identity of a Client through documentation. The Department of Finance and the agencies recognize that imposing this requirement on banks that offer credit card accounts has the potential to change the way they do business by requiring them to collect additional information beyond what they currently receive directly from a customer who opens an account at the point of sale or over the phone. The Treasury Department and the agencies are aware of the legislative history of Section 326, which indicates that Congress expects regulations under this section to be appropriately adapted to accounts opened in situations where the account holder is not physically present at the financial institution, and that regulations should not impose onerous and prohibitive requirements. or inconvenient. [24] Section 103.121(a)(6) Tax Identification Number. The proposed provision repeats the wording of section 103.34(a)(4), which states that the provisions of section 6109 of the Internal Revenue Code and the regulations of the Internal Revenue Service determine below what a “tax identification number” is. There were no comments on this approach, and the Ministry of Finance and agencies essentially adopted it as proposed, with minor technical changes. The Ministry of Finance and the agencies point out that the final rule does not approve or prohibit banks` acceptance of information from certain types of identification documents issued by foreign governments. A bank must decide for itself whether the information provided by a customer is reliable based on appropriate risk factors, including those mentioned above (the types of accounts held by the bank, the different methods of account opening provided by the bank, other types of credentials available, and the size, location and customer base of the bank). The proposal also included a limited exemption from the requirement for a bank to obtain a tax identification number from a customer opening a new account. The exception allowed a bank to open an account for someone other than an individual (e.g.
open a corporation, partnership or trust) that has applied for an Employer Identification Number (EIN) but has not received it, provided that the bank receives a copy of the application prior to opening the account and receives the EIN within a reasonable time after the account is created. The preamble to the proposed regime explained that this exemption was provided for a new corporation that might need access to banking services, particularly a bank account or credit renewal, before obtaining an EIN from the Internal Revenue Service. In addition, the Final Rule codifies and clarifies the “deferral exception.” Under the final rule, the definition of “account” excludes accounts that a bank acquires by acquiring, merging, purchasing assets or assuming liabilities from third parties. [8] The Ministry of Finance and the agencies note that the law provides that the regulations require adequate procedures to “verify the identity of an individual wishing to open an account.” Since these transfers are not initiated by customers, these accounts do not fall within the scope of Article 326. [9] Section 103.121(b)(1) General. The proposed rule required each bank to implement an appropriate ACAN given the size, location and nature of its business. The proposed rule required a bank`s CIP to include the procedures required by law, describe those procedures, and describe certain minimum elements that each of the procedures must contain. In addition, the proposed rule required that the CIP be drafted and approved by the Bank`s Board of Directors or a committee of the Board of Directors.
In addition to defining who is a “customer,” the final rule includes a list of entities that are not considered “customers.” Many commentators have asked why a bank should be required to verify the identity of a government agency or instrument opening a new account, or a publicly traded company subject to SEC reporting requirements. Consistent with these and other comments that the Final Rule focuses on verifying the identity of customers who are at higher risk of not being properly identified, the Final Rule excludes the following readily identifiable entities from the definition of “customer”: a financial institution regulated by a functioning federal regulator; a bank regulated by a State banking supervisory authority; and government agencies and instruments and publicly traded companies pursuant to Article 103.22(d)(2)(ii)-(iv). [16] Section 103.22(d)(2)(iv) exempts these entities only to the extent of their domestic activities. Accordingly, a bank`s CIP applies to all foreign offices, affiliates or subsidiaries of those companies that open new accounts. As noted in the definitions section above, many commenters have criticized the proposed approach to vetting existing customers who open new accounts. The final rule addresses these concerns by amending the definition of “customer” to exclude a person who already has an account with the bank if the bank has reason to believe that they know the person`s true identity. When opening an account for a foreign company or a company that does not have an identification number, the bank must request other government-issued documents confirming the existence of the company or company. Other commenters have required that the final regulations allow a financial institution to initially meet its CIP obligations only if a customer has different accounts with different affiliates. These commenters noted that it is common for a client to hold several different accounts with a financial institution and its affiliates. For example, the same customer may have a credit card account with an affiliate, a residential mortgage with another affiliate, and a brokerage account with an affiliate. Commenters insisted that a bank should be able to rely on customer identification and verification performed by an affiliate, as it would be unnecessary and unnecessarily burdensome to subject the same customer to substantially similar customer identification and verification procedures repeatedly.
In addition, these commentators urged the Treasury and agencies to allow a bank to rely on a subsidiary to reduce the significant cost of keeping duplicate records of identity verification under the rule`s record-keeping provisions. Section 103.121(b)(2)(ii)(b) Non-documentary verification. Given that some accounts are opened by telephone, mail and the Internet, the proposed rule provided that a bank`s CIP should also include procedures describing the non-documentary methods that the bank will use to verify identity and when the bank will use these methods (either in addition to or instead of documents). The preamble to the proposed Regulations also noted that even if the client presents identification documents, it may be appropriate to also use non-documentary methods. (2) Identity Verification Procedures. The CIP includes risk-based procedures to verify the identity of each client where appropriate and practicable. The procedures must allow the bank to reasonably assume that it knows the true identity of each customer. Those procedures shall be based on the Bank`s assessment of the relevant risks, including those arising from the different types of accounts held by the Bank, the different methods of opening accounts provided by the Bank, the different types of credentials available, and the size, location and customer base of the Bank. These procedures shall include at least the elements described in paragraph (a)(2).
The final rule states that a bank`s CIP must include procedures requiring the bank to comply with all federal guidelines issued in relation to these lists. In the absence of lists designated under this provision, the final rule cannot provide further guidance in this area. Many commentators have criticized the requirement that a bank receive both the customer`s physical and postal addresses, if they are different. Most commenters called on the Department of Finance and agencies to remove the requirement for the customer to provide a physical address. Some of these commenters stated that this requirement could impact the ability of certain populations to obtain a bank account, including: military personnel, people living in mobile homes without a fixed address, and truck drivers who do not have a physical address. Banks that offer credit card accounts and card issuers have stated that the address demand will be extremely onerous as they would have to change the way they do business and, in some cases, credit card banks currently lack the ability to collect both addresses.