This document contains information that CSi has presented this spring at various User Conferences sponsored by CSi s Business Partners.

Transcription

1 USA Patriot Act Section 326 Customer Identification Summary of Final Rule May 1, 2003 This document contains information that CSi has presented this spring at various User Conferences sponsored by CSi s Business Partners. Account means: A formal banking relationship; Established to provide or engage in; Services, dealings, or other financial transactions. Including: A deposit account A transaction account An asset account Other extension of credit Providing safety deposit box Other safekeeping services Cash management Custodian services Trust services It does NOT MEAN: When no formal banking relationship is established, i.e. check-cashing, wire transfer, or sale of a check or money order; May 1, 2003 Page 1 of 1 USA Patriot Act Summary.doc

2 An account acquired through an acquisition, merger, purchase of assets, or assumptions of liabilities; or An account opened for the purpose of participating in an employee benefit plan established under ERISA. Bank means: A bank as that term is defined in (c) that is subject to regulation by a Federal functional regulator; and A credit union, private bank, and trust company, as set forth in (c), that does not have a Federal functional regulator (c) Bank. Each agent, agency, branch or office within the United States of any person doing business in one or more of the capacities listed below: (1) A commercial bank or trust company organized under the laws of any state or of the United States; (2) A private bank; (3) A savings and loan association or a building and loan association organized under the laws of any state or of the United States; (4) An insured institution as defined in section 401 of the National Housing Act; (5) A savings bank, industrial bank or other thrift institution; (6) A credit union organized under the law of any state or of the United States; (7) Any other organization (except a money services business) chartered under the banking laws of any state and subject to the supervision of the bank supervisory authorities of a State; (8) A bank organized under foreign law; May 1, 2003 Page 2 of 2 USA Patriot Act Summary.doc

3 (9) Any national banking association or corporation acting under the provisions of section 25(a) of the Act of Dec. 23, 1913, as added by the Act of Dec. 24, 1919, ch. 18, 41 Stat. 378, as amended (12 U.S.C ). Customer means: A person that opens a new account; and An individual who opens a new account for: o An individual who lacks legal capacity, such as a minor, or o An entity that is not a legal person, such as a civic club. It does NOT MEAN: A financial institution regulated by a Federal functional regulator or a bank regulated by a state bank regulator; A department or agency of the United States, of any State, or of any political subdivision of any State; An entity established under the laws of the United States, any State or any political subdivision of any State that exercises governmental authority on behalf of the United States, any State or any political subdivision of any State; An entity, other than a bank, whose common stock or analogous equity interests are listed on the NYSE, AMEX, or Nasdaq (except stock or interests listed under separate Nasdaq Small-Cap Issues ); or A person that has an existing account with the bank, provided that the bank has a reasonable belief that it knows the true identity of the person. May 1, 2003 Page 3 of 3 USA Patriot Act Summary.doc

4 U.S. Person means: A United States citizen, or An entity other than an individual (such as a corporation, partnership, trust), that is established or organized under the laws of a State or the United States. Non-U.S. person means: A person that is not a U.S. person. The Customer Identification Program. The core of Section 326 of the USA Patriot Act is the Customer Identification Program (also known as a CIP ). A bank must implement a written CIP that is appropriate for its size and type of business. If a bank is required to have an anti-money laundering compliance program, the CIP must be part of that program. For banks who do not presently have a Federal functional regulator, they are subject to the CIP requirements, however their CIPs must be approved by their board of directors. The CIP is required to include certain procedures to verify customer identity within a reasonable time after the account is opened. The procedures must outline when the bank will use documents, non-documentary methods, or a combination of document and non-documentary methods to verify customer identity. Identity verification procedures. The CIP must contain procedures to verify the identity of each customer to the extent feasible, that enable the bank to have a reasonable belief it knows the true identity of each customer. The identity verification procedures must be based on May 1, 2003 Page 4 of 4 USA Patriot Act Summary.doc

5 the bank s assessment of relevant risks such as: types of accounts the bank maintains, ways of opening accounts at the bank, what kinds of identifying information are available, the size of the bank, its location, and the bank s customer base. Customer information required. When opening an account, or within a reasonable time after the account is opened, the following information is required to be collected on the customer: Name Date of Birth for an individual Address o For an individual, a residential or business street address; or if the individual doesn t have a residential or business street address APO or FPO box number, or The residential or business street address of the next of kin or of another contact individual o For non-individuals, such as corporations, partnerships, or trusts, the principal place of business, local office, or other physical location; and An identification number o For a U.S. person, a taxpayer identification number; or o For a non-u.s. person, one or more of the following: A taxpayer identification number The number and country of issuance of a passport An alien identification card number and the country, or May 1, 2003 Page 5 of 5 USA Patriot Act Summary.doc

6 Any other government-issued document, including number, country of issuance and bearing a photograph or other similar identifying element that shows the nationality or residence of the non-u.s. person. o When opening an account for a foreign business or entity that doesn t have an identification number, the bank must require alternative government-issued documentation that certifies the existence of the business or entity. o Exception for persons applying for a TIN. The CIP may include procedures that allow a customer who has applied for, but not yet received a TIN to open an account. The CIP must provide a way for the bank to confirm that the application has, in fact, been filed before the customer opens the account and that the customer expects to receive the TIN in a reasonable period of time after the account is opened. For credit card accounts, a bank can get identifying information required from a third-party source before extending credit to the customer. Documentary Verification. The bank s CIP must have procedures established that identify which documents the bank will use if it is verifying a customer s identity with documents. Documents include an unexpired government-issued identification that shows the nationality or residence and has a photo or similar safeguard, such as a driver s license or passport. If the customer is an entity other than an individual, documents such as certified articles of incorporation, a business May 1, 2003 Page 6 of 6 USA Patriot Act Summary.doc

7 license issued by a governmental entity, a partnership agreement, or trust instrument. Non-Documentary Verification. If the bank will rely on non-documentary methods, the CIP must have procedures describing what those non-documentary methods are. Nondocumentary methods could include direct customer contact, independent verification of the customer s identity by comparing information given by the customer with information obtained from a consumer credit reporting agency, public database or other source, by checking references with other financial institutions, or obtaining the customer s financial statement. The bank s procedures for non-documentary verification must take into consideration situations where an individual is not able to provide unexpired government-issued identification documents with a photo or other safeguard, or where the bank is unfamiliar with the documents presented by a customer, when the account is opened without obtaining any documents from the customer, when a customer opens an account other than in-person at the bank, and any time the bank is in a situation that increases the risk that the bank will not be able to verify the true identity of the customer with documentation. Verification of Identity of Business Customers. If the customer is not an individual, the CIP must contain procedures that ensure the bank will obtain information about the individuals who have authority or control over the account, including account signers, to be able to verify the customer s identity. This would only apply in a situation where the bank cannot verify the customer s true identity using documentary or non-documentary verification. May 1, 2003 Page 7 of 7 USA Patriot Act Summary.doc

8 Procedures for Lack of Verification. The CIP must address what procedures the bank will follow in a situation where it cannot form a reasonable belief that it knows the true identity of the customer. These procedures should include when a bank should not open an account, the terms and conditions by which a customer may use an account while the bank is in the process of verifying the customer s identity, when the bank should close a customer s account if attempts to verify the customer s identity have been unsuccessful, and when the bank should file a Suspicious Activity Report as required by applicable law and regulation. Procedures related to records. The bank s CIP must contain procedures for making and maintaining a record of all the information received under the procedures verifying customer identity. At a minimum, the records must include all identifying information about a customer, a description of documents relied on in obtaining the information, any identification number, place of issuance, date of issuance, and expiration date if available. If non-documentary verification methods were used, the bank must keep a record of what methods were utilized, and what the results were of any measures taken to verify the identity of a customer via non-documentary verification. A record must also be kept describing the resolution of any substantive discrepancy discovered during the process of verifying identifying information. The bank must retain the records of information received under procedures for documentary verification of customer identity for five years from the date the account is closed, or five years after the account is closed or becomes dormant in May 1, 2003 Page 8 of 8 USA Patriot Act Summary.doc

9 the case of credit card accounts. The bank must retain records of which documents were relied on, the results of measures taken to verify the identity of a customer under the bank s non-documentary procedures, and records of how substantive discrepancies discovered while verifying customer identity were resolved. These records must be retained for five years from the time the record was made. Comparison with government lists. The bank s CIP must include procedures to determine if the customer appears on any list of suspected or known terrorists or terrorist organizations that are issued by any Federal government agency, including those designated as such by the Treasury Department in consultation with Federal functional regulators. The CIP must state that the determination must be made in a reasonable period of time after the account is opened, or at any time earlier as may be required by Federal law, regulation or any directives issued by the Federal government that apply to such lists. Customer Notice. The CIP must provide for procedures by which the bank provides customers with adequate notice that the bank is requesting information to verify their identities. Notice is adequate if the bank gives a general description of the identification requirements outlined above, and gives the customer a notice in a way that is designed to reasonably ensure that customers can see the notice or it is given in way that customers know about it before opening an account. The bank could post the notice in its lobby, on its website, include it on its account applications, or provide some other form of written or oral notice. May 1, 2003 Page 9 of 9 USA Patriot Act Summary.doc

10 Sample Notice The final Rule provides the following sample notice: IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver s license or other identifying documents. Reliance on another financial institution. The CIP may provide for procedures that specify when the bank will rely on another financial institution, including an affiliate, to perform any of the bank s CIP procedures regarding a customer who has opened or is opening an account, or otherwise established a formal banking or business relationship with the other financial institution for the purposes of providing or engaging in services, dealings or other financial transactions. The bank s reliance on another financial institution must be reasonable which means the other financial institution must be subject to a rule implementing the anti-money laundering regulations. The other financial institution and the bank must also have an contract that requires the other financial institution to certify annually that it has implemented its required anti-money laundering May 1, 2003 Page 10 of 10 USA Patriot Act Summary.doc

11 program, and that the other financial institution or its agent will conduct the requirements of the bank s CIP. Exemptions. A bank or type of account may be exempt from the requirements of Section 326 of the USA Patriot Act. The bank s Federal functional regulator, with the concurrence of the Secretary of the Treasury, may exempt the bank, or type of account of the bank from these requirements by order or regulation. In making the determination, the regulator and the Secretary will consider whether an exemption is consistent with the purposes of the Bank Secrecy Act and with safe and sound banking. Other factors that are relevant and appropriate may also be considered. If a bank or type of account is not subject to a Federal functional regulator, the Secretary will make the exemption determination. May 1, 2003 Page 11 of 11 USA Patriot Act Summary.doc